Pound Australian Dollar Exchange Rate News: GBP/AUD Climbed amid Volatile Market Conditions

December 7, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Climbed amid Volatile Market Conditions

Pound (GBP) Surged Despite Tumbling House Prices

The Pound (GBP) found renewed strength against the riskier currencies on Wednesday despite the housing market remaining in disarray after house prices tumbled at the biggest rate since 2008. A turbulent market mood provided choppy conditions for the Pound, but improved energy security provided much-needed support for Sterling.

With the economy still feeling the impacts of the disastrous mini-budget, the housing market saw the biggest drop since the financial crisis of 2008. Average house prices fell 2.3% in November, as a myriad of factors pulled prices down amid soaring mortgage rates. The third fall in a row, the average price fell almost £7000. Kim Kinnaird, director at Halifax Mortgages, commented on the drastic fall that highlighted the market volatility:

‘Some potential home moves have been paused as homebuyers feel increased pressure on affordability and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise.’

Elsewhere, Prime Minister Rishi Sunak and President Joe Biden have agreed to increase gas exports from the US. In a move to improve energy security ahead of the winter amid Russia’s prolonged invasion of Ukraine. The announcement of an ‘energy security and affordability partnership’ aims to reduce dependence on Russian energy.

The deal expects to more than double the amount of liquified natural gas (LNG) exported to the UK compared to last year. Despite the UK not being overly reliant on Russian energy imports, it is however, susceptible to the huge spikes in energy prices in Europe. Sunak said of the deal:

‘Together the UK and US will ensure the global price of energy and the security of our national supply can never again be manipulated by the whims of a failing regime.’

Australian Dollar (AUD) Slipped on Slowing Economic Growth

The Australian Dollar (AUD) struggled for demand on Wednesday as the economy continues to slow. GDP grew by 0.6% QoQ against an expected 0.7% rise.

Despite being the fourth consecutive quarter of growth, the expansion was the softest in the sequence. Amid soaring living costs and restricted spending, climbing interest rates saw household consumption grow the least. The Treasurer Jim Chalmers reassured that the Australian economy remains solid and resilient. Chalmers added:

‘(The economy is) performing solidly in the face of steep headwinds from overseas as well as considerable and compounding pressures on Australian families and businesses.

‘Despite these solid headline figures for September, we know Australian households are feeling the strain of the combined impact of the global energy crisis, cost-of-living pressures and rising interest rates.’

Elsewhere, lending some modest support to the global market sentiment, is China’s continued move away from its zero-Covid policy. Further easing of economically stifling restrictions has boosted investors’ spirits. Authorities have confirmed that home quarantines are now allowed as the shift from zero-Covid continues. The risk-sensitive ‘Aussie’ is highly susceptible to global slowdown fears as it holds the position of proxy currency to the world's second largest economy.

Meanwhile, offsetting any further gains is worrying news out of Taiwan. Exports fell for the third consecutive month, and far sharper than anticipated. Exports dropped 13.1% YoY and highlighted the slowing global demand. It was the sharpest fall in seven years.

GBP/AUD Exchange Rate Forecast: RBA Bulletin to Inspire the Aussie

Looking ahead, the Pound Australian Dollar exchange rate could see further movement with the release of the Reserve Bank of Australia (RBA) on Thursday. Any further indicators towards monetary policy or inflation expectations could weigh on the Australian Dollar.

Meanwhile, thin trading conditions could see the Pound rely on external factors and domestic woes to influence movement.

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