Pound Australian dollar (GBP/AUD) exchange rate remains muted following weak UK GDP
(Updated 15:25, 11/09/2024) The pound Australian dollar (GBP/AUD) exchange rate continued to pull back today, after weaker-than-forecast UK GDP data dented investor confidence in the pound (GBP).
Rather than staging a post-election recovery, as expected, the British economy stalled in July. GDP printed at 0%, versus forecasts of 0.2%, pointing to the second consecutive month of zero growth.
The downbeat data applied some pressure to the pound, particularly ahead of next week’s interest rate decision from the Bank of England (BoE). Although most analysts still expect the BoE to leave rates unchanged, the stall in GDP paired with Tuesday’s slowdown in wage growth are seen to have slightly increased the odds of a cut.
At the time of writing, GBP/AUD is trading at AU$1.9640, only marginally down on the day but 0.3% lower than an overnight high of AU$1.9700.
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Pound Australian dollar (GBP/AUD) exchange rate wavers on interest rate speculation
Having struck a near one-month high overnight, the pound Australian dollar (GBP/AUD) exchange rate then relinquished its gains this morning after UK GDP growth unexpectedly flatlined in July.
At the time of writing, GBP/AUD is trading at AU$1.9653, having fallen from an overnight high of AU$1.9700.
Pound (GBP) cedes gains as UK economy flatlines
The pound (GBP) rose last night, only to surrender its gains this morning after the UK’s latest GDP data came in weaker than forecast.
Analysts had expected the British economy to expand 0.2% in July, after stalling in June. Instead, UK GDP flatlined again.
Although many economists have brushed off the downbeat data, the figures could encourage some Bank of England (BoE) policymakers to vote for an interest rate cut at the bank’s meeting next week, particularly after yesterday’s confirmed cooldown in wage growth.
However, most commentators believe the BoE will wait to see more data before committing to another rate cut. This is limiting GBP’s downside.
Australian dollar (AUD) softens following RBA comments
Meanwhile, the Australian dollar (AUD) faced some selling pressure overnight as a souring market mood applied some pressure to the risk-sensitive currency.
In addition, comments from Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter seemed to dampen AUD demand.
Hunter said that higher interest rates are working to slow demand in the Australian economy, likely leading to a mild economic downturn.
This has reinforced expectations that Australian interest rates have peaked, and that the RBA may turn its focus to when it can start to unwind monetary policy.
GBP/AUD exchange rate forecast: central bank expectations to continue driving movement?
Looking ahead, the pound Australian dollar exchange rate could be relatively quiet for the rest of the week amid a lack of high-impact data on both sides.
The only Australian data that could affect AUD is the country’s latest consumer inflation expectations, which are expected to ease from 4.5% in August to 4.1% in September. Signs that Australian consumers believe inflation will cool this month could prompt bets that the RBA may start considering cutting interest rates, which in turn could hurt AUD.
For the pound, a speech from BoE Deputy Governor Sarah Breeden could prompt movement, if she gives any hints ahead of next week’s monetary policy decision.
Besides from this, risk appetite could drive GBP/AUD movement. If the general market mood remains downbeat, we could see Sterling strengthen against the riskier ‘Aussie’.