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Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as July’s UK Growth Beats Consensus

September 9, 2019 - Written by John Cameron

GBP/AUD Exchange Rate Edges Higher as Brexit Recession Fears Recede

The Pound Australian Dollar (GBP/AUD) exchange rate rose today, with the pair trading around AU$1.798 after July’s UK growth figure beat forecasts and rose from 0% to 0.3%, easing fears of a Brexit-related recession in the near term.

David Cheetham, the Chief Market Analyst at the online trading company XTB, commented:

‘Following a flat reading in June this is a positive surprise and the accompanying rise in manufacturing production is also pleasing. While the figures are far from stellar, after a contraction in the second quarter the chances that we see a negative GDP print in the third have now dropped significantly, meaning that a technical recession will likely be avoided.’

Today also saw July’s UK manufacturing production figure, which rose unexpectedly from -0.2% to 0.3%, further bolstering optimism in the UK economy.

However, Brexit developments remain in focus today with the anti-no-deal Brexit bill, which passed through Parliament last week, generally expected to gain royal assent later on today.

The bill will effectively compel Prime Minister Boris Johnson to request to an extension to the October 31 Brexit deadline. However, both Johnson and the Conservative Party continue to insist on honouring the deadline, despite the legal ramifications of doing so.

AUD/GBP Exchange Rate Falls despite Improving Australian Home Loans in July

The Australian Dollar (AUD) eased against the stronger Sterling despite better-than-expected Australian home loans figure for July, which rose from -0.8 to 5%.

Gareth Aird, an Economist at the Commonwealth Bank, was upbeat:

‘There’s an old adage that one month’s numbers do not make a trend. But we think that the July figures mark a turning point. We expect lower mortgage rates to increase the demand for credit from here which will in turn support dwelling prices and turn a negative wealth effect into a positive one.’

The risk-sensitive ‘Aussie’ continues to suffer from uncertainty surrounding US-China trade relations, despite US Treasury Secretary Steven Mnuchin’s comments that the two superpowers have a ‘conceptual’ agreement, which further underlines possible positive developments.

As a result, we could see the Australian Dollar begin to benefit from easing geopolitical tensions, potentially bolstering the AUD/GBP exchange rate later on today.

GBP/AUD Outlook: Sterling Could Rise Further if Anti-No-Deal Brexit Bill Passes

Pound traders are looking ahead to tomorrow’s release of July’s average earnings figure, which is expected to ease slightly from 3.9% to 3.8%.

Tomorrow will also see July’s UK ILO unemployment rate, which is expected to hold steady at 3.9%.

Meanwhile, Australian Dollar investors will be focusing on Chinese data – with China being Australia’s largest trading partner – and any signs of improvement could bolster market sentiment in the ‘Aussie’.

The GBP/AUD exchange rate is likely to remain upbeat tomorrow if the anti-no-deal bill gains royal assent, for this will effectively shelve fears of a no-deal Brexit on October 31.

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