GBP/AUD Rate Remains Subdued Amid Economic Troubles

The British Pound (GBP) is moderate against the Australian Dollar (AUD) today as inflation fears take hold amid risky market conditions.

As of this writing, the British Pound and Australian Dollar (GBP/AUD) exchange rate is around $1.76799, relatively unchanged from this morning.

Australian dollar (AUD) exchange rates are dynamic amid political stability and risky sentiment in the market

The Australian dollar strengthens as the country appears to have avoided a suspended parliament after elections over the weekend saw the Labor Party return to power and Anthony Albanese was sworn in as Australia’s 31st Prime Minister. As fears of political instability from a hung parliament waned, risk trading instead supported the Aussie.

More support could be directed towards the Australian dollar as the Reserve Bank of Australia (RBA) continues its hawkish outlook for a potentially larger interest rate hike in June.

Elsewhere, investors are optimistic that China could be about to start easing Covid restrictions amid falling cases. As the “Aussie” trades as a proxy for the Chinese economy, this gives the AUD a boost.

British Pound (GBP) exchange rates falter amid economic uncertainty

The pound received an unexpected boost on Friday after retail sales were much better than expected. But with a recession looming, this data comes with caveats, as it suggests the sharp rise in grocery store sales is due to more people staying home and stocking up, limiting the additional book request.

With the cost of living rising, due in part to soaring energy prices, there are fears that the situation will only get worse. As calls for further government intervention mount, Prime Minister Boris Johnson is reluctant to provide concrete plans on how to tackle the cost of living crisis, and instead argues that work is the solution to the economic crisis :

banner

“I’m proud to say that you have to go all the way back to 1974 to find a time when unemployment was as low in the UK as it is today, and no matter how hard the economy post -Covid is facing today, I just want you to dwell on that for a second.

However, with wages unable to keep up with inflation and many already struggling to find jobs, there are fears that a deterioration in the economic landscape is on the horizon.

Michael Lewis, CEO of energy giant E.ON, warns that if nothing is done, more families will be pushed into poverty:

“What we do know is that we are seeing a significant number of people in fuel poverty. That is to say more than 10% of their disposable income devoted to energy. In October, our model suggests that this could reach 40% if the government did not intervene in some way.

All eyes will be on Johnson and the UK government and their proposed plans to support struggling households. Will the pound encounter other headwinds?

GBP/AUD exchange rate forecast: National data and inflation to further limit the pound sterling?

Going forward, the British Pound and Australian Dollar exchange rate may see further movement with PMI data expected for the UK and Australia. Experts predict lower activity for both countries, pointing to mounting inflationary pressures and subsequent potential headwinds in the GBP/AUD pair.

Australian retail data could give the Australian dollar a boost as sales are expected to climb, but not as high as the previous month, suggesting a slowdown that could deter investors.

Besides these data releases this week, the pound can rely on global risk sentiment and the ongoing conflict in Ukraine to boost the move. Brexit fears could weigh heavily on the pound, which could further weaken the currency.