Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Falls as EY Item Club Slashes UK Growth Forecast

April 29, 2019 - Written by John Cameron

STORY LINK Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Falls as EY Item Club Slashes UK Growth Forecast

Pound Australian Dollar (GBP/AUD) Slips as UK Growth Forecasts Slashed to 1.3%

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slipped, and the pairing is currently trading at an inter-bank rate of AU$1.8325.

The EY Item Club said that UK GDP growth had been artificially high due to a rise in stockpiling as firms braced for the possibility of a no-deal Brexit.

Forecasters at the Item Club cut growth forecasts for the UK economy, predicting the economy would grow by 1.3% over the year.

This was cut from the previous prediction of 1.5% growth as Brexit uncertainty continues.

It is suggested that the UK saw a strong start to 2019 due to a rise in stockpiling of goods ahead of the original 29 March Brexit departure date.

However, the unwinding of stockpiling could hit growth later in the year.

Australian Dollar (AUD) Edges Up despite RBA Likely to Signal a Rate Cut

The Australian Dollar likely remained muted at the start of this week’s session as the prospect of a rate cut from the Reserve Bank of Australia (RBA) is currently suggested to be an even-money bet.

While the prospect of a dovish RBA likely weighed on the risk-sensitive Australian Dollar, this could do little to stop it from edging up against Sterling.

However, Westpac’s Chief Economist, Bill Evans believes that the central bank will only signal a rate cut for later in the year rather than actually cutting interest rates next week.

Commenting on this, Evans said:

‘Markets are likely to be relying heavily on the precedent on 2016 for their ‘early’ rate cut view. But there are considerable differences.

‘The housing market is much more fragile than in 2016 and we see little risk in any over reaction by housing to rate cuts as we saw in 2016 but Governor Lowe may remain cautious, for a little longer, given his strong emphasis on asset markets.

‘We think that a move next week will be a little early for the RBA.’

Pound Australian Dollar Outlook: Will the GBP/AUD Exchange Rate Slide on Successful US-China Trade Talks?

Looking ahead to Tuesday, the Pound (GBP) could rise against the Australian Dollar (AUD) following the release of the UK GfK consumer confidence figure.

If April’s confidence edges up, Sterling could receive an upswing of support.

Meanwhile, US negotiators head to China on Tuesday to continue face-to-face talks which could cause the risk-sensitive ‘Aussie’ to rise.

If reports suggest that trade talks are progressing successfully, risk appetite could increase and the Pound Australian Dollar (GBP/AUD) exchange rate could slide.

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TAGS: Pound Australian Dollar Forecasts