Pound Australian Dollar (GBP/AUD) Exchange Rate Edges Lower as RBA Rate Cut Boosts Consumer Spending
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate edged down and the pairing is currently trading at around AU$1.8249.
The Australian Dollar edged up against Sterling despite a report from Reuters showing analysts had trimmed their long term forecast for AUD.
This comes after the Reserve Bank of Australia (RBA) slashed interest rates for the third time this year earlier in the week.
Markets have priced in further rate cuts from the central bank as well as unconventional monetary easing measures.
While the bank’s cuts seem to have done little to boost activity outside of the housing market, recent data showing an increase in house prices in Sydney and Melbourne likely buoyed AUD.
Added to this, retail sales rose by 0.4% in August, suggesting the rate cuts have helped boost consumer spending.
Pound (GBP) Falls as UK Tangled in US-EU Trade War
As Britain prepares to leave the European Union, US tariffs on European goods have sent the country into a trade war with the US.
The US has pledged to hit the EU with tariffs on $7.5 billion worth of goods, including Scotch whisky, just days before the UK is set to leave the bloc.
Commenting on this, managing director of Aceo Ltd, an independent Scotch whisky supplier, Edward Odim noted:
‘It throws up enormous uncertainty. With that realignment of allegiances going on, it is surprising that something as uniquely geographical as Scotch whisky is targeted by the Americans.
‘It is quite clear that Britain’s position in the world is highly ambiguous at the moment. If we are going to be out of Europe, what is the purpose of it?’
He also noted that the 25% tariffs would ‘really hurt’.
Brexit Pessimism Sends GBP Lower
Meanwhile, Brexit pessimism saw UK manufacturing sales plummet at the fastest pace since 2011 thanks to uncertainty over how or if the UK will leave the bloc at the end of the month.
This likely dampened Sterling sentiment, causing the pairing to edge lower on Friday.
Commenting on this, BCC head of economics, Suren Thiru said:
‘Our findings point to a worrying drop-off in UK economic activity, with unrelenting uncertainty over Brexit and a notable slowing in global growth prospects dragging down almost all the key indicators in the quarter.
‘Looking forward, weakening orders, confidence and investment intentions suggest that unless action is taken in the UK’s current weak growth trajectory could drift markedly lower over the near term.’
Added to this, the mixed response after Prime Minister Boris Johnson revealed his Brexit plan left GBP under pressure.
Reports revealed the European Union is ‘open but not convinced’ by Johnson’s new Brexit deal.
Pound Australian Dollar Outlook: Will AUD Slide as Construction Data Disappoints?
Looking ahead to Monday, the Australian Dollar (AUD) could slide against the Pound (GBP) following the release of AIG’s construction data.
If the Construction Index slumps further than expected in September, the ‘Aussie’ could fall.
Next week’s in-person trade talks between the US and China are likely to cause movement in the risk-sensitive Australian Dollar.
If reports reveal talks are not progressing as expected, the Pound Australian Dollar (GBP/AUD) exchange rate is likely to rise.