September 1, 2020 - Written by John Cameron
STORY LINK Pound to Australian Dollar (GBP/AUD) Exchange Rate Rises as Australian GDP Predicted to Drop to Record Lows
GBP/AUD Exchange Rate Edges Higher as Australia Braces for GDP Data
The Pound to Australian Dollar (GBP/AUD) exchange rate rose by 0.6% today, with the pairing currently fluctuating around AU$1.823. The ‘Aussie’ suffered today as Australian markets predict the nation’s Gross Domestic Product (GDP) to plunge in the second quarter.
With the figure predicted to fall by -6% quarter-on-quarter – its largest contraction since records began – we could see the AUD/GBP exchange rate continue to slump as Australia heads towards its first recession in nearly 30-years.
Today also saw the Reserve Bank of Australia (RBA) hold its interest rate at a record low of 0.25%. This bought some relief to Australian markets, however, after Philip Lowe, the RBA’s Governor, said it was unlikely to go any lower.
Laing Simmons, the managing director Leanne Pilkington, was upbeat about the RBA’s decision, however, saying:
‘Relatively speaking, the economic fallout of the coronavirus that is reverberating around global markets has not impacted Australia as hard as many other nations. Even considering Victoria’s second wave and the potential for subsequent outbreaks elsewhere, employment figures are encouraging and other key indicators point to our economy’s overall resilience.’
‘Low, steady interest rates for the foreseeable future are appropriate to support the recovery.’
Pound (GBP) Rises as UK Manufacturing Remains Strong in August
The Pound (GBP) edged higher today following the publication of August’s UK manufacturing PMI, which remained strong despite dipping slightly from 55.3 to 55.2.
Consequently, however, the GBP/AUD exchange rate has headed higher on hopes for a recovery in Britain’s manufacturing sector.
Rob Dobson, the director at IHS Markit, commented on the data, saying:
‘The recovery of the UK manufacturing sector gathered pace in August. Output expanded at the fastest rate in over six years as new work intakes rose to the greatest extent since November 2017, led by an upturn in domestic demand and signs of recovering exports. Business optimism also remained encouragingly robust and close to July's recent peak.’
However, today saw Prime Minister Boris Johnson sparked concerns over another wave of coronavirus after warning of a return of ‘this disease, this wretched Covid’. He said:
‘[W]e know that there is still going to be more of this disease, this wretched Covid, still to come, and although we know there’ll be more outbreaks, we’re also absolutely confident that we are going to be able to deal with those outbreaks, and bit by bit this incredible country is getting back on its feet.’
Meanwhile, fears of a possible no-deal Brexit are holding back some of Sterling’s gains, with Michel Barnier, the EU’s Chief Negotiator, set to continue informal trade negotiations in London today.
However, there are growing fears that relations between the UK and the EU are suffering from complications over a post-Brexit fishing deal.
GBP/AUD Outlook: Could Australia’s Slip into Recession Drag Down the ‘Aussie’ Further?
Australian Dollar (AUD) investors will be awaiting tomorrow’s release of the Australian GDP figure for the second quarter. However, if this confirms fears and falls by -6% in the second quarter, then we would see the AUD/GBP exchange rate drop.
Tomorrow will also see the release of Australia’s AiG Performance in Construction Index for August. Any signs of deterioration in Australia’s construction sector would also prove AUD-negative.
Pound (GBP) investors will be looking ahead to tomorrow’s speech from Andrew Haldane, the Bank of England’s (BoE) chief economist. If he is notably upbeat about Britain’s economic recovery, then we could see the GBP/AUD exchange rate edge higher.
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TAGS: Australian Dollar Forecasts Pound Australian Dollar Forecasts