Pound Australian Dollar Exchange Rate News: GBP/AUD Firmed as UK Economy Expands Better than Expected

December 12, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Firmed as UK Economy Expands Better than Expected

Pound (GBP) Rallied as GDP Grew 0.5% in October

The Pound (GBP) found moderate success against many of its peers on Monday in the wake of better-than-expected GDP growth data. Against expectations of a 0.4% increase, the economy grew by 0.5% instead.

Bouncing back from a poor September where the economy contracted by 0.6%, UK GDP expanded MoM for November. However, capping any further gains was that the UK economy contracted 0.3% over a three-month period up until October. Despite GDP currently sits marginally above pre-Covid levels, the economic outlook remains bleak. Downbeat forecasts still expect the UK to enter a lengthy recession. Chancellor Jeremy Hunt commented on the economic forecast, warning that it will get worse before they get better. Hunt added:

‘While today’s figures show some growth, I want to be honest that there is a tough road ahead. Like the rest of Europe, we are not immune from the aftershocks of Covid-19, Putin’s war, and high global gas prices.’

Elsewhere, despite the economy bouncing back to post a modest expansion, market experts remain convinced a long recession is looming. Thomas Pugh, economist at RSM UK, expected 2023 to be a tough year. A year-long recession is predicted, as well as unemployment to creep up higher. Pugh said:

‘We expect a peak-to-trough fall in GDP of around 2.5%. That would be slightly smaller than the early 1990s recession and significantly less than the Global Financial Crisis.

‘We expect the unemployment rate to rise from the 3.6% it is now, to around 5% by the end of 2023, entailing job losses of about 200,000. Hospitality and retail sectors are likely to bear the greatest losses as consumers discretionary spending power shrinks.’

Australian Dollar (AUD) Undermined by Souring Market Sentiment

Meanwhile, the Australian Dollar (AUD) failed to muster much strength as market sentiment appeared cautious ahead of a frantic week of economic releases. With inflation data for both the US and UK released on Tuesday and Wednesday respectively, and the subsequent central bank decisions, investors remain reluctant on making moves.

Meanwhile, further positivity out of China could be limiting any further losses to the risk-sensitive ‘Aussie’. Reports of China opening borders with Hong Kong from next month to allow easier movement between the regions as the country heads into the Lunar New Year holidays. Elsewhere, Chinese authorities have announced that the Covid tracking application will be taken offline, as the world’s second largest economy scales back its zero-Covid stance.

GBP/AUD Exchange Rate Forecast: Improving Confidence to Spur the Aussie?

Looking ahead, the Pound Australian Dollar exchange rate could see further fluctuations with the release of both consumer and business confidence indices. An expected improvement in both surveys could improve AUD investors’ moods.

Meanwhile, key employment data could influence the Pound considerably. Tuesday sees the release of crucial labour market data. With unemployment expected to tick higher, a cooling labour market could impact the Bank of England’s (BoE) future monetary policy.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Australian Dollar Forecasts