Pound Australian Dollar Exchange Rate News: GBP/AUD Falls amid UK Industrial Strike Action

December 8, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Falls amid UK Industrial Strike Action

GBP/AUD Exchange Rate Undermined by UK Strike Concerns

The Pound to Australian Dollar (GBP/AUD) exchange rate struggled on Thursday amid concerns ongoing rail strikes will severely impact UK economic activity over the holiday period.
At time of writing the GBP/AUD exchange rate traded at around AU$1.8076, which was roughly down 0.4% from Thursday’s opening rate.

Pound (GBP) Under Pressure as Economic Pressures Mount

The Pound (GBP) was down against the majority of its peers on Thursday, caused by increasingly downbeat domestic headlines.

A lack of data caused GBP investors to focus on current industrial action. As the cost-of-living crisis continues to deepen many UK consumers are struggling to meet rising costs. As such, many workers are campaigning for an increase in real wages to offset rising inflation.

However, the strikes are beginning to impact business activity in the run up to the key Christmas trading period. Many retailers rely on the increased sales in December to cushion them in January’s quiet period. Although consumers are cancelling Christmas reservations as they struggle to navigate reduced rail services.

Chief Executive Officer of UKHospitality, Kate Nicholls has said that the hospitality industry risks losing £1.5bn in Christmas revenue. She adds:

‘A lot of people are saying it’s too difficult to come in, and if you’re writing off next week, you might as well write off the week after. So it’s going to be an early Christmas shutdown.’
As the economic outlook of the UK continued to slip on Thursday, the Pound was left with little support.

Australian Dollar (AUD) Muted by Downbeat Market Mood

The Australian Dollar (AUD) was up against the Pound but traded narrowly against most other peers on Thursday. News from Ukraine stoked market risk-aversion, leaving AUD will little impetus.

Investors are fearful of a prolonged war between Ukraine and Russia following comments made by Russian President Vladimir Putin this week. Putin has hinted that the war could be a ‘long-term process’. This combined with his comments about the rising risk of nuclear war has unsettled markets.

In an address on Wednesday Putin stated:

‘Such a threat is growing, it would be wrong to hide it. We have not gone mad, we are aware of what nuclear weapons are.’

Compounding market unease is the Chinese government’s roll back on Covid restrictions. Whilst China re-opening would be good for its economy and global trade investors are still wary.

There are concerns that if China eases restriction too quickly then Covid cases could spike. If this happens the country could reinstate its zero-Covid policy, which would impact global growth. As such, investors are closely monitoring China’s progress.

Amid such a downbeat market, the risk-sensitive ‘Aussie’ lacked support on Thursday.

GBP/AUD Exchange Rate Forecast: AUD to Trade on Risk Sentiment?

Looking ahead, the Pound Australian Dollar exchange rate could be driven by market mood.

Whilst Australia lacks any data releases on Friday, Chinese inflation data is due. As AUD is a proxy currency for China it can be impacted by important Chinese releases. China’s inflation is expected to fall from 2.1% to 1.6%.

If this prints as true, it could undermine the Australian Dollar amid fears China could soon face a deflation problem.

Turning to the Pound, a continued lack of data could weigh on the currency. In the absence of data, investors will likely continue to trade on domestic headlines. Further news of struggling businesses and soaring prices ahead of Christmas will likely limit GBP movement.

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