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Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Flat as UK Economy Rebounds in Q1

May 10, 2019 - Written by John Cameron

Pound Australian Dollar (GBP/AUD) Exchange Rate Muted as UK Manufacturing Growth at 30-Year High

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slipped and the pairing is currently trading at an inter-bank rate of AU$1.8591.

Data released on Friday by the Office for National Statistics (ONS) revealed that the UK economy rebounded as expected during the first quarter of 2019.

Preliminary GDP rose by 0.5% in the first three months of the year, up from a 0.2% rise in the final quarter of 2018.

The ONS said the rise was partly driven by Brexit stockpiling ahead of the UK’s original date of departure from the European Union.

Meanwhile, further data revealed that UK manufacturing growth hit a 30-year high in March likely due to Brexit stockpiling.

Annual manufacturing output rose by 2.2%, the fastest rate of growth since Q3 1988, however this could do little to buoy the Pound.

Risk-Sensitive Australian Dollar (AUD) Flat as Trump’s Tariffs Take Effect

On Friday morning, US President Donald Trump’s tariff hike to 25% on $200 billion worth of Chinese goods officially took effect.

In response, the Chinese Commerce Ministry stated that it ‘deeply regrets’ this decision and it would take necessary countermeasures, failing to elaborate further.

The rise in tariffs comes in the middle of face-to-face trade talks between the two sides.

On Thursday, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke with Chinese Vice-Premier Liu He for 90 minutes.

Meanwhile sentiment improved slightly as President Trump revealed he had received a ‘beautiful letter’ from his Chinese counterpart, Xi Jinping which said:

‘Let’s work together, let’s see if we can get something done.’

The President stated:

‘He just wrote me a beautiful letter. I’ve just received it and I’ll probably speak to him by phone.’

While the rise in tariffs further heightened global economic tensions, however the Pound was left muted against the risk-sensitive ‘Aussie’.

AUD Muted as RBA Downgrades Economic Forecasts

The Australian Dollar remained muted against the Pound as the Reserve Bank of Australia’s (RBA) revealed it had downgraded its economic forecasts.

In the bank’s monetary policy statement it is predicted that Australia will see slower economic growth, slower progress in lowering unemployment and lower inflation.

However, the RBA believe inflation will move back to 2% by the end of 2020 despite its prediction that wage growth will remain low and unemployment will remain relatively unchanged.

Pound Australian Dollar Outlook: Will the GBP/AUD Exchange Rate Rise on Further US-China Tensions?

The Australian Dollar (AUD) could slide against the Pound (GBP) as US-China trade talks continue.

If reports suggest that trade discussions are not progressing successfully, the risk-sensitive ‘Aussie’ could be left dampened as risk-appetite becomes increasingly fragile.

Looking ahead to next week, the Australian Dollar could slide following the release of the home loans data.

If amount of home loans processed in March is lower than forecast, the Pound Australian Dollar (GBP/AUD) exchange rate could rise.

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