Coming into the middle of the week, the GBP/AUD exchange rate has edged higher even with poor UK growth data that was released yesterday. The pairing was trading at around AU$1.9340 ahead of Thursday’s election. The markets are remaining optimistic that the Conservative party will retain power in government and that Brexit will be seen through to start the year.
Pound Sterling Rises in Strength Ahead of Election
Tuesday saw the rise of GBP, in doing so it clung to previous gains. This was a little surprise as the UK’s growth data was revealed which showed the UK economy growing at the slowest rate in seven years to begin the start of the fourth and final quarter of the year. In the three months that led up to October, the economic growth within the UK stalled, and the annual GDP rose by a mere 0.7%. This weak growth was the weakest rate of expansion since March 2012. Economists have described the data batch as a negative view of the recent inactivity levels coming off the back of a flat GDP reading for the month of October.
Outlook for the AUD Looks Bleak, This Is Likely to Weigh on the Already Struggling Currency
For the AUD, it slumped against the Pound Sterling on Tuesday after a National Australia Bank (NAB) survey revealed a disappointing outlook for the Australian economy. The NAB reported that business conditions remained unchanged, whilst confidence slipped. Economists for the NAB also stated that the conditions were below average, and confidence is also lacking. Added to this, there is the risk that employment growth may slow, and investment will remain weak even with a spill over demand from public sector spending and stability in the mining sector. The positivity that was observed in the previous months appears to have now faded and therefore the NAB is not expecting a significant recovery being achieved any time soon.
For the GBP/AUD exchange rate, AUD could extend its losses against GBP. The Westpac consumer confidence data could show a further slide which would mean a decline for the ‘Aussie’. For GBP, its growth relies on confidence that the Tory party will prevail in Thursday’s election. If polls continue to reveal Boris Johnson as favourite, then GBP will likely rise higher. YouGov’s update is expected before the election and should this show a Conservative majority the GBP will likely extend its lead on AUD and other major currencies.
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