GBP/AUD Exchange Rate Slips as UK Growth Slows
The Pound Australian Dollar (GBP/AUD) exchange rate is on the back foot at the start of this week’s session after the release of the UK’s latest GDP reading.
At the time of writing the GBP/AUD exchange rate dipped almost 0.3% this morning after the UK economy slowed sharply in 2018.
Pound (GBP) Exchange Rates Muted as UK GDP Slows
The Pound (GBP) is struggling to hold its ground against the Australian Dollar (AUD) and the majority of its other peers this morning as markets react to the UK’s latest GDP figures.
According to the Office for National Statistics (ONS), UK GDP slowed from 0.6% to 0.2% in the fourth quarter, with growth actually contracting 0.4% in December.
This saw the UK economy expand just 1.4% through 2018, the weakest pace of growth since 2012.
The ONS attributed the slowdown at the end of the year to a lacklustre performance by the UK industrial sector, with factory production shown to have contracted through the entire fourth quarter.
However many analysts also pointed to Brexit, with heightened uncertainty dragging on business investment and limiting however.
Australian Dollar (AUD) Bolstered by Surge in Iron Ore Futures
At the same time the Australian Dollar (AUD) is gaining ground at the start of this week’s session thanks to an indication that in iron ore will continue to soar this week.
The reopening of Chinese markets following the Lunar New Year has seen Dalian iron ore futures spike 8% on Monday.
With iron ore accounting for roughly for 20% of Australia’s total exports, the news has helped to bolster the appeal of AUD this morning.
Brexit uncertainty cl;early hitting UK GDP and investment. GDP growth in 2018 1.4pc, weakest since the financial crisis. Business investment has contracted in past 4 quarters and now nearly 4pc down on a year ago. UK already counting the cost and we have not left the EU yet!
— Andrew Sentance (@asentance) February 11, 2019
GBP/AUD Exchange Rate Forecast: UK Inflation Figures to Offer some Support to Sterling?
Looking ahead, the Pound Australian Dollar (GBP/AUD) exchange rate may seek to pick itself back up in the mid-week with the release of the UK’s latest CPI figures.
Economists forecast that these will show that domestic inflation held just within the Bank of England’s (BoE) 2% target range in January, possibly keeping hopes alive that the bank could still hike rates in 2019.
In the meantime, the ‘Aussie’ may come under some pressure overnight on Monday, with the release of Australia’s latest Business confidence figures as some analysts predict that sentiment will have continued to dip at the start of the year.