Pound Australian Dollar Exchange Rate Trends Sideways amid Further Calls for PM Johnson’s Resignation

February 8, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate Trends Sideways amid Further Calls for PM Johnson’s Resignation

Pound Australian Dollar (GBP/AUD) Exchange Rate Rangebound Despite Australian Business Recovery

The Pound Australian Dollar (GBP/AUD) exchange rate climbed overnight, potentially boosted by a strong recovery in Australian business confidence and the soaring price of iron ore. The currency pair dipped this morning however and traded within a narrow range amid a greater than expected rise in British retail sales.

At time of writing the GBP/AUD exchange rate is at around $1.9000, virtually unchanged from this morning’s figures.

Pound (GBP) Edges Upward as MPs Accuse Johnson of Fuelling Mob Anger

The Pound (GBP) ticked up against its safer rivals today despite facing growing headwinds amid further calls for Prime Minister Boris Johnson’s resignation. Continued disputes regarding the Northern Ireland Protocol have also likely limited gains for Sterling.

GBP may have been buoyed by a strong recovery in retail sales in January. A fall in Covid-19 case levels and the easing of the majority of the UK’s restrictions may have helped the sales rise from 0.6% to 8.1%, well above a forecast drop to -0.3%.

The British Retail Consortium (BRC) who collected the data was quick to point out however that record high inflation may also account for a large portion of January’s sales growth.

Political furore surrounding PM Boris Johnson has likely continued to place pressure of the Pound today. On Monday evening protestors surrounded opposition leader Kier Starmer as he attempted to leave Westminster.

MPs across the political spectrum have highlighted comments made by Johnson in the House of Commons last week as the potential inciting incident. Johnson has repeatedly refused to issue an apology for the comments, and sources claim that this has led to further Conservative MPs submitting letters calling for a vote of no confidence in the PM.

Brexit-related headwinds may also be limiting gains for the currency after Norther Ireland’s DUP party stated they will continue to undermine the region’s government unless their demands over the Northern Ireland Protocol are met.

This has left the NI government unable to act until after the local elections in May. Edwin Poots, the UK region’s agriculture minister, has said that the DUP will not allow the power-sharing administration to continue unless all checks on British goods arriving in NI by the EU come to an end.

Australian Dollar (AUD) Gains as Iron Ore Prices Skyrocket

The Australian Dollar (AUD) has climbed against its competitors today. Following Monday’s announcement that the country would be reopening its borders to vaccinated visitors, falling Omicron hospital numbers and a recovery in business confidence has also likely helped boost the ‘Aussie’.

Business confidence levels in January rose well above forecasts of -14 to 3 as firms signalled that they believed the Omicron outbreak had peaked, and that staffing issues would hopefully ease alongside falling case numbers.

Soaring iron ore prices have also likely increased gains for AUD today as expectations of large-scale investment in Chinese infrastructure fuelled the commodity’s climb. Chinese authorities have promised to act to counter rampant market speculation however which could harm iron ore’s rise.

GBP/AUD Exchange Rate Forecast: Will UK Growth Slow as Forecast?

Looking to the week ahead, speeches by Bank of England (BoE) board member Huw Pill on Wednesday and Governor Andrew Bailey on Thursday could prompt movement in the Pound should either give any hawkish indicators of the central bank’s forward policy.

A forecast dip to the UK’s GDP growth figures on Friday could push Sterling down however as soaring inflation and a cost of living squeeze potentially continues to harm the country’s recovery.

For the Australian Dollar, Tuesday’s forecast dip in consumer confidence for February could see the ‘Aussie’ slide. A speech from Reserve Bank of Australia (RBA) Governor Philip Lowe could see AUD tick upward however should investors pick up on any indicators of an interest rate rise from the central bank.

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