Pound Australian Dollar Exchange Rate News: GBP/AUD Stumbles as Shanghai Prepares to Ease Covid Lockdown

May 30, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Stumbles as Shanghai Prepares to Ease Covid Lockdown

GBP/AUD Loses Ground as China Prepares to Ease Lockdown

The Pound Australian Dollar (GBP/AUD) exchange rate is trading lower this morning as China looks set to ease certain covid lockdown rules, boosting the China-proxy Australian Dollar (AUD). Meanwhile, the Pound (GBP) is being pressured by UK politics.

At the time of writing, the GBP/AUD exchange rate is trading at approximately $1.76, down roughly 0.3% from today’s opening levels.

Australian Dollar (AUD) Buoyed as China Announces Plans to Ease Covid Restrictions

The China-proxy Australian Dollar is edging higher against the Pound this morning after China announced plans to ease covid lockdown restrictions.

Shanghai – China’s largest cargo depot – will lift certain business restrictions on Wednesday after covid infections declined from 122 to 67 over the weekend.

From the 1st of June, businesses in Shanghai will no longer need to be on a ‘whitelist’ to restart production, and the number of people allowed to return to work will be revised. Moreover, Beijing is reopening certain elements of public transport, enabling people to move more freely throughout the city.

It’s hoped this will kickstart China’s economic growth, which is expected to have contracted during the latest covid lockdowns. In turn, AUD exchange rates are regaining traction due to the close trading partnership between Australia and China.

As China’s economy reopens, AUD investors are hopeful that this will boost Australian exports.

However, AUD’s upside has been capped as some experts warn that the easing of restrictions will almost certainly see a rise in covid infections again. This may potentially cause lockdowns to be reimplemented later in the year.

In addition, the ‘Aussie’ is being bolstered by strong commodity prices. At the time of writing, gold – Australia’s fifth largest export commodity – is nearing a three-week high, trading at approximately $1860 per ounce, up by 0.4%.

Pound (GBP) Subdued amid UK Politics

The Pound is falling against the Australian Dollar this morning as UK Chancellor Rishi Sunak’s new energy support is criticised.

Last week, Sunak announced new energy support measures – worth £15bn – to ease the UK cost-of-living crisis. The measures will see every UK household receive a one-off payment of £400, with the lowest 8m income household receiving £650.

However, Green MP Caroline Lucas has stated these ‘measures will not only make absolutely no difference to families’ soaring energy bills, [but] any new fossil fuel production acts as a wrecking ball to our net zero climate targets.’

In addition, GBP exchange rates are being dented as Prime Minister Boris Johnson continues to face pressure over the ‘partygate’ report.

Despite Johnson’s call for parliament to ‘move on’ from the scandal, he is still facing calls for resignation from both the opposition and Conservative MPs.

This comes after Government officials allegedly attempted to edit Sue Gray’s final report.

Angela Rayner, Labour’s deputy leader, said the situation ‘looks like yet another cover-up and there are new questions the prime minister must answer for his involvement.’

GBP/AUD Exchange Rate Forecast: Will Australia’s GDP Dent AUD Exchange Rates?

Looking ahead, the Pound Australian Dollar exchange rate is likely to be boosted by Australia’s latest GDP figures.

During the first three months of 2022, Australia’s GDP is forecast to slow from 3.4% to 0.7% which may dent the ‘Aussie’s appeal.

Moreover, the Chinese manufacturing PMI may also weigh on demand for the Australian Dollar.

In May, China’s manufacturing sector is expected to have contracted: this has the potential to reignite fears over demand for Australian exports.

Meanwhile, due to a lull in notable UK economic data during this week’s session, the Pound is likely to remain exposed to UK politics.

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