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Pound Australian Dollar Exchange Rate News: GBP/AUD Muted amid UK Economic Concerns

September 21, 2021 - Written by John Cameron

Pound (GBP) Undermined by Rising Economic Uncertainty

The Pound (GBP) is trading without any strong directional bias against the Australian Dollar (AUD) today as traders grow increasingly concerned about the UK’s economic trajectory.

As a result surge in wholesale gas prices, the UK is now facing an energy price crisis which has already seen some industries forced to halt operations after the increased costs made them economically inviable.

This has caused a knock-on effect with domestic CO2 production, following the closure of two fertilizer plants which produce roughly 60% of the UK’s CO2 needs.

A shortage of CO2 threats UK food supplies due to it being used in meat production as well as to chill products for transport.

This has exacerbated concerns over the reliance of the UK’s economic recovery, which was already in question due to staff shortages and supply chain constraints.

Australian Dollar (AUD) Muted on Cautious RBA Minutes

At the same time, the Australian Dollar (AUD) is also struggling to attract support today, following the publication of the minutes from the Reserve Bank of Australia’s September policy meeting.

The minutes reiterated the RBA’s cautious outlook for the future as the spread of the Delta variant of the coronavirus continues to drag on the country’s economic outlook.

The minutes read:

‘Members recognized that the outbreak of the Delta variant was delaying the recovery and had added to the uncertainty about the future.

‘The economy was expected to bounce back as vaccination rates increase and restrictions are eased. However, there was considerable uncertainty about the timing and pace of the recovery, which was likely to be slower than experienced earlier in 2021.’

The ‘Aussie’ also continues to face some pressure as a result of a prevailing risk-off mood, with sees investors apprehensive regarding high-yield currencies such as AUD.

GBP/AUD Exchange Rate Forecast: BoE Rate Decision in the Spotlight

Looking ahead, the main catalyst of movement in the Pound to Australian Dollar (GBP/AUD) exchange rate through the latter half of this week will undoubtedly be the conclusion of the Bank of England’s (BoE) rate decision on Thursday.

No policy changes are expected from the BoE this month, leaving the focus to be on the bank’s forward guidance. While recent comments from BoE Governor Andrew Bailey have been fairly hawkish, in light of the growing headwinds facing the UK economy, the bank may opt to strike a more cautious tone this week, potentially sending the Pound lower.

Also potentially weighing on Sterling sentiment will be the release of the UK’s latest PMI figures with economists forecasting that economic activity in the private sector will have continued to moderate in light of staff shortages and supply chain issues.

The publication of Australia’s own PMI figures will be the focus for AUD investors in the latter half of the week.

September’s preliminary figures are widely expected to report another contraction of growth as the ongoing lockdowns in Syndey and Melbourne continue to disrupt economic activity.
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