Pound Australian dollar (GBP/AUD) exchange rate slips as OECD downgrades UK outlook
The pound Australian dollar (GBP/AUD) exchange rate is weakening this morning, amid bleak UK economic forecasts.
At the time of writing, GBP/AUD is trading at around AU$1.9148, a drop of just under 0.3% from today’s opening rates.
Pound (GBP) dented by downbeat OECD forecasts
The pound (GBP) is under pressure this morning, following bleak economic forecasts from the Organisation for Economic Cooperation and Development (OECD).
The OECD has warned that the UK will suffer not only higher inflation than its peers, but slower growth. The OECB expects growth of a meagre 0.4% in 2024, down from a 0.7% forecast in February.
Furthermore, it expects the UK’s economy to be the slowest grower amongst all G7 territories in 2025. The organisation signposts tight monetary policy from the Bank of England (BoE) as the chief cause of this.
Additionally, it expects that the BoE will begin to cut interest rates in the third quarter of 2024. The OECD’s report stated:
‘Monetary policy is assumed to start easing from the third quarter of 2024, with Bank Rate gradually lowered from its current peak of 5.25% to 3.75% by the end of 2025, as inflation continues converging towards target.’
However, a bullish market mood could be cushioning the pound this morning, due to its increasingly risk-sensitive nature.
Australian dollar (AUD) firms amid cheery trade
The Australian dollar (AUD) is ticking higher this morning, amidst an upbeat market mood.
Due to a more dovish than expected Federal Reserve interest rate decision, markets are eyeing riskier assets. This is allowing the acutely risk-sensitive antipodean currency to grind higher against safer peers.
However, AUD’s gains are likely being trimmed by worse-than-expected trade data for March. On a monthly basis, Australia’s trade surplus shrank from AU$6.591 billion down to AU$5.024 billion.
As this is indicative of slowing trade in Australia’s export driven economy, it seems to be denting hawkish Reserve Bank of Australia (RBA) bets.
While the RBA was expected explore the possibility of further interest rate hikes, slowing trade may reverse this expectation.
Pound Australian dollar exchange rate forecast: Final services PMIs in focus
Looking ahead for the pound, a lack of impactful macroeconomic data is likely to shift focus towards the final services PMI.
In April, the vital UK sector is forecast to have expanded, with the index rising from 53.1 to 54.9. If the final print confirms this, the pound could catch bids amid signs of improving economic activity.
As the UK economy is attempting to recover from a brief recession, signs of improvement could benefit Sterling.
For the Australian dollar, a similar lack of data is likely to push focus onto its own finalised services PMI.
If the final reading confirms softening activity in the sector, the ‘Aussie’ may struggle to attract support.
Elsewhere, risk appetite is likely to play a role in shaping the exchange rate. As a safer asset, a shift towards more downbeat trade could lift GBP over the acutely risk-sensitive Australian dollar.