GBP AUD Exchange Rate Tumbles as Annual GDP Slips

September 29, 2017 - Written by John Cameron

STORY LINK GBP AUD Exchange Rate Tumbles as Annual GDP Slips

The Pound Australian Dollar (GBP AUD) exchange rate has tumbled this morning as the UK’s annual GDP figures were unexpectedly revised down.

Pound (GBP) Slides on Disappointing Growth Figures

Sterling sentiment has plummeted this morning as investors reacted to the UK’s final second quarter GDP reading.

According to data published by the Office for National Statistics (ONS) Britain’s annual growth rate slipped from 2% to a four-year low of 1.5% in the second quarter, this was below previous estimates which placed growth at 1.7%.

ONS statistician Darren Morgan said, ‘There was a notable slowdown in growth in the first half of 2017. The often buoyant services sector was the only area to grow in the second quarter.’

However it wasn’t all sunshine and rainbows for the UK’s service sector in the second quarter as the ONS’s accompanying Index of Services reported a 0.2% decline in July after a more 0.3% rise in June, with the downturn being largely attributed to slowdown in the movie industry thanks to a decline in footfall in cinemas.

Adding to the Pound’s woes this morning was news that the UK’s current account deficit rose in the second quarter as the ONS reported that it jumped from £22.3bn to £23.2bn, disappointing markets who had expected it to have fallen to £16bn.

The negatively surrounding the UK’s latest economic data also caused markets to overlook the latest comments from Bank of England (BoE) Governor Mark Carney, which otherwise may have bolstered Sterling.

In an interview with BBC Radio 4 Carney heavily hinted towards the possibility of a November rate hike as when questioned about the timeframe of the bank’s plans to tighten monetary policy he suggested that rates could rise in the ‘relatively near term’.
Carney said during the interview, ‘If the economy continues on the track that it's been on, and all indications are that it is, in the relatively near term we can expect that interest rates will increase.’

Australian Dollar’s (AUD) Advance Weakened by Slump in Iron Ore Prices

Meanwhile the Australian Dollar is struggling to fully exploit the weakness in the Pound this morning thanks to the continued slump in iron ore prices.

Spot prices for iron ore fell another 2% to $62.89 a tonne by the start of the Asian session last night, its lowest levels in three-months and a major decline from the highest it reached last month where it threatened to break past the $80 a tonne barrier.

The latest slump in prices follows a sharp decline in Chinese iron ore futures yesterday which was prompted by speculation that upcoming curbs on Chinese steel production will see demand for iron ore tumble over the winter period.

Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank said, ‘Impending steel output cuts in China are weighing on the iron ore demand outlook. Market participants also note that iron ore restocking demand will likely wane as steel production comes under pressure.’

With iron ore making up 20% of all Australian exports the continued fall in the commodity has major consequences for the country’s economic growth, and a prolonged downturn in prices could see the nations GDP figures weaken in the third quarter.

GBP AUD Forecast: UK Manufacturing Activity to Have Slowed in September?

Looking ahead to next week the GBP AUD exchange rate may stumble again at the start of the session as the UK publishes its latest Manufacturing PMI, with some economists forecasting that it will show slight drop in British factory activity in September.

Meanwhile the Australian Dollar could see more substantial losses at the opening of next week’s session as Australia releases its own manufacturing PMI for September, as analysts suggest that the index may plummet from 59.8 to 54.3.

Current Interbank Exchange Rates

At the time of writing the GBP AUD exchange rate was trending around 1.7061 and the AUD GBP exchange rate was trending around 0.5859.

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