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GBP/AUD Exchange Rate Drops -0.8% after Gloomy UK GDP Growth Forecast

April 27, 2018 - Written by Toni Johnson

On Thursday’s trading session, the Pound to Australian Dollar exchange rate opened in the region of 1.8414 and closed marginally higher around 1.8419.

This minor advance in the GBP/EUR exchange rate came as MPs met in the House of Commons to discuss UK membership of the EU customs union.

The debate ended with a majority of MPs backing continued membership, although the effects of the vote are unclear as the result is non-binding.

There was little data for Australian Dollar traders to refer to, with the AUD making minor losses because of concerns about metal tariff negotiations.

As the deadline for negotiating with the US draws near, the concern is that by not securing an exemption Australian metal producers and exporters could be harmed.

GBP/AUD Exchange Rate Plummets after UK GDP Forecast to Have Fallen



The estimate that UK GDP growth slowed to a five-year low at the start of 2018 has shattered confidence in the Pound (GBP) today, triggering a -0.9% drop against the Australian Dollar (AUD).

This major deterioration has been seen elsewhere, with Sterling also dropping sharply against the Euro, US Dollar and New Zealand Dollar.

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Office for National Statistics (ONS) predictions are for UK GDP growth to come in around 0.1% for Q1 2018, while an annual slowdown from 1.4% to 1.2% has been forecast for the comparison with Q1 2017.

Although Chancellor Philip Hammond was quick to blame the poor data on the two snowstorms that hit the UK during March, economists were sceptical and instead focused on the construction sector.

Mr Hammond’s theory was called into particular question by a statement from the ONS’s Rob Kent-Smith, who said;

‘Our initial estimate shows the UK economy growing at its slowest pace in more than five years, with weaker manufacturing growth, subdued consumer-facing industries and construction output falling significantly.

‘While the snow had some impact on the economy, particularly in construction and some areas of retail, its overall effect was limited with the bad weather actually boosting energy supply and online sales’.


Looking to the future, Economist Intelligence Unit UK analyst Danielle Haralambous cautioned that;

‘Growth was surprisingly soft in the first quarter of 2018, even lower than our expectation, which factored in the impact of bad weather in February-March.

'This hit output in the construction sector particularly hard, but there is more to the story than snow, and the slowdown will be a big consideration in the Bank of England’s (BoE) deliberations next month’.


The prospect of no BoE interest rate hike in May has added insult to injury for Pound traders, who have roundly deserted the UK currency for the meantime.

Rising AUD/GBP Exchange Rate Comes despite AU Credit Crunch Warning



The day’s strong Australian Dollar to Pound exchange rate has mainly been caused by the Pound tanking, given the lack of supportive AU data at present.

The latest economic news from Australia has been a warning from UBS Bank economist George Tharenou.

Mr Tharenou has warned that with new, tougher conditions for securing mortgage loans in Australian, there is a risk of a ‘credit crunch’ developing.

The concern is that coupled with slow wage growth in Australia, this could mean a glacial pace of economic growth and no foreseeable policy changes from the Reserve Bank of Australia (RBA).

GBP/AUD Forecast: Will Pound to Australian Dollar Exchange Rate Recover on UK PMI Growth?



Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate might be able to recover from the latest losses if the coming week’s PMI activity readings beat forecasts.

Expectations are for UK manufacturing activity to have slowed marginally in April, but for higher reported construction and services sector readings.

Given the poor showing in Q1, the construction sector isn’t expected to have risen out of the sub-50 point contraction range in April, but a near-50 point figure could still boost the Pound.

As usual, the services sector reading is likely to be the most high-impact of the three when it is released on 3rd May.

The current forecast is for the services PMI to rise from 51.7 points to 52.9, which could trigger a brief GBP/AUD exchange rate advance.

Next week’s main Australian economic data will be a Reserve Bank of Australia (RBA) interest rate decision on 1st May, followed by balance of trade data released on 3rd May.

Another interest rate freeze is expected from the RBA, but policymakers might boost the AUD if they have an optimistic economic outlook.

The trade balance stats have been forecast to print negatively, with the existing surplus predicted to shrink in March.

Such as result could lower confidence in the Australian Dollar and trigger a GBP/AUD exchange rate rise.
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