Pound Australian Dollar (GBP/AUD) exchange rate muted ahead of UK Spring Budget
The Pound Australian Dollar (GBP/AUD) exchange rate is trading sideways this morning, as GBP investors are reluctant to place any aggressive bets ahead of the UK’s Spring Budget later this afternoon.
At the time of writing the GBP/AUD exchange rate is trading at $1.9511. Virtually unchanged from this morning’s opening levels, but down roughly half a cent from yesterday’s six-month high.
Pound (GBP) flat ahead of Spring Budget
The Pound (GBP) is trapped in a narrow range this morning as markets await the unveiling of the UK’s Spring Budget.
Should UK Chancellor, Jeremy Hunt, include growth-boosting measures, the Pound could climb, however should markets have concerns over his proposed budget, GBP could slide.
Ahead of today’s release, economists are speculating on the likelihood that Hunt will deliver a selection of tax cuts.
Kallum Pickering, Senior Economist at Berenberg Bank predicts:
‘Since Hunt became Chancellor in October 2022 in the wake of the disastrous Liz Truss and Kwasi Kwarteng September mini-budget, which triggered a serious bout of gilt market turmoil and badly hurt the UK’s credibility, he has played it safe and repeatedly cautioned against risky borrowing.
‘As a result, we expect Hunt to stick to the broad fiscal direction he has set out in all previous plans. That is, a gradual reduction in government spending as a share of GDP alongside a gradual increase in taxes in order to reduce government borrowing to a sustainable level.’
Australian Dollar (AUD) rangebound following GDP
The Australian Dollar (AUD) is holding steady this morning despite a lower-than-expected GDP reading.
Australia’s latest GDP figures reported domestic growth expanded by 0.2% in the last quarter of 2023, below market expectations for a 0.3% increase, and down from Q3’s upwardly revised figure of 0.3%.
This marked the ninth consecutive period of quarterly growth, however Q4’s figure printed at the softest pace in five quarters.
Even though the data confirmed another expansion in Australian GDP, the below-forecast reading served to limit AUD’s gains.
Elsewhere, a prevailing upbeat market mood is helping to keep the risk-sensitive ‘Aussie’ afloat this morning, as it firms against some of its safer counterparts.
GBP/AUD exchange rate forecast: Australian balance of trade to boost AUD?
Looking past the UK’s Spring Budget, which is likely to primarily drive movement in the Pound Australian Dollar exchange rate today, movement in the pairing on Thursday may be driven by Australia’s trade data.
January’s figures are expected to report a widening of Australia’s trade surplus, which could provide support for the ‘Aussie’, so long as this surplus is driven by export growth.
Turning to the Pound, UK macroeconomic data is thin on the ground in the latter half of the week leaving GBP investors to continue to digest the Budget and potentially limiting support for the Pound.