Pound Australian dollar (GBP/AUD) exchange rate remains muted despite upbeat UK GDP data
Article updated 15:30, 10/5/2024:
The pound Australian dollar (GBP/AUD) exchange rate is remaining tepid this afternoon, amid mixed analysis of the UK’s GDP data.
While it showed that the UK economy had exited a shallow recession, the prospect of a low-growth outlook remains significant.
The National Institute of Economic and Social Research commented:
‘The fact that the UK’s GDP growth transitioned into positive territory after experiencing the shallow recession in the second half of 2023 is encouraging. However, the UK economy has largely flatlined following the initial stages of post-pandemic recovery.’
At the time of writing, GBP/AUD is trading at around AU$1.8961, showing little movement from the morning’s opening rates.
Original article continues below:
Pound Australian dollar (GBP/AUD) exchange rate narrow despite strong UK GDP data
The pound Australian dollar (GBP/AUD) exchange rate is flat this morning, despite news of the UK economy’s return to growth.
At the time of writing, GBP/AUD is trading at around AU$1.8955, showing little movement from the morning’s opening rates.
Pound (GBP) supported by robust economic growth
The pound (GBP) is being underpinned this morning by the latest UK GDP data, which printed notably above forecasts.
In the first quarter of 2024, the UK economy expanded by 0.6%, above estimates of 0.4% growth. This marked a clear recovery from the UK’s recent technical recession.
However, the impact on the pound was undercut by a less-than-optimistic analysis of the UK’s future growth prospects. Economic growth is expected to remain limited in the UK over 2024, amid ongoing productivity weakness.
Yael Selfin, Chief Economist at KPMG, commented:
‘Despite the better near-term outlook, the improvement in GDP growth looks likely to be constrained by the ongoing weakness in productivity growth as well as reduced scope to increase employment levels. This could see annual GDP growth in the region of just 1% per year in the medium term.’
The low-growth outlook could be capping the pound’s appeal this morning, preventing it from fully capitalising on the data.
Elsewhere, a cautiously upbeat market mood may be further bolstering GBP this morning. Due to its increasingly risk-sensitive nature, the cheery tone could allow Sterling to find additional support.
Australian dollar (AUD) wavers amid lack of data
The Australian dollar (AUD) is wavering this morning, despite a seemingly upbeat market mood.
This is likely due to a lack of impactful macroeconomic data, which is shifting investor focus away from the ‘Aussie’.
Further pressuring AUD this morning could be falling coal prices. At the time of writing, coal prices are falling by roughly $2.15, a drop of just under 1.5% from the morning’s opening rates.
Elsewhere, dovish commentary from the Reserve Bank of Australia (RBA) earlier in the week may still be affecting AUD.
The RBA ruled out the need for further interest rate hikes, which prompted the ‘Aussie’ to plunge against its peers. Investors are likely continuing to adjust their existing bets on hawkish action from the RBA, undermining AUD.
Pound Australian dollar exchange rate forecast: UK wage data in focus
Looking ahead for the pound, the core catalyst of movement is likely to be the latest UK labour data, due Tuesday.
In the three months preceding March, markets expect average earnings to have cooled to 5.9%, down from 6%. This could undermine the pound by suggesting easing wage growth, one of the Bank of England’s key inflationary measures.
However, this could be offset by expectations of a hold in the UK’s unemployment rate. If the rate held at 4.2% in March as forecast, GBP could see some support.
For the Australian dollar, meanwhile, attention is likely to be focused on the latest business confidence from NAB.
In April, confidence is forecast to have ticked higher on a monthly basis with the figure rising from 1 to 2. This could strengthen the ‘Aussie’ against its peers by suggesting improved conditions.