GBP/AUD Exchange Rate Set to Slip as Recession Fears Gather Pace
The Pound Australian Dollar (GBP/AUD) exchange rate is softening today as downbeat UK data compounds inflationary pressures rocking the UK.
At time of writing the GBP/AUD exchange rate is around $1.7226, a 0.67% drop from this morning’s opening levels.
Pound (GBP) Sinks amid Poor Retail Sales and PMI Figures
The Pound (GBP) could be set to slide further ahead of a quiet week devoid of major data. With inflation soaring to fresh 40-year lows, the Pound came under increased pressure with the release of continuing plummeting retail sales and mixed PMI data.
Retail sales fell for the second consecutive month as the cost-of-living crisis continues to hamper consumer spending. Meanwhile, manufacturing and service sector PMI revealed the continuing slowdown of the UK economy. Despite printing above forecasts, the figures still point to a worsening economic outlook.
Looking ahead, a lack of major data will leave the Pound exposed to market sentiment. Potentially exerting further downward pressures on the Pound will be the ongoing political uncertainty surrounding the race for the Prime Minister seat.
As the Conservative leadership has now been whittled down to two, investors will be focused on how either Liz Truss or Rishi Sunak plan to steer the UK economy out of the turbulent economic storm the UK is engulfed in.
Australian Dollar (AUD) Strengthens despite Weaker than Expected PMI
The Australian Dollar (AUD) is softening against some of its rivals today as poorer than anticipated PMI figures highlight the slowdown of the Australian economy. The service sector fell to 50.4, precariously close to stagnation as the country continues to battle surging Covid cases.
Growing fears of another slowdown in China are weighing on the ‘Aussie’, as the strict zero-Covid policy threatens further lockdowns. If the world’s second largest economy was to slow again, the Australian Dollar could lose demand.
However, bolstering the ‘Aussie’ today could be the rise of iron ore prices as they claw their way back from seven-month lows. Demand has risen on the back of falling steel inventories in China.
Looking ahead, investors will be keeping an eye on China and their developing Covid situation. If cases continue to rise across the country, lockdowns could half manufacturing and businesses once again. Looming global recession risks could weigh heavily on the ‘Aussie’.