The AUDGBP exchange rate was lower again on Tuesday after the latest UK GDP growth figures topped expectations once more. The British pound rallied this week as traders unwound bearish election bets and the GDP figures will enhance this trend.
Australia saw its latest Federal budget announced on Tuesday and the big spending plans will also weigh on the Aussie dollar, where traders had previously focused on the central bank for spending.
The AUD to GBP trades at 0.5525 after the pair surrendered the 0.5600 level on Monday with sharp sterling gains.
UK GDP tops forecasts once more
UK GDP growth figures were better than expected this morning with the 3-month average for March seeing a -1.5% loss. This was an improvement on the -1.7% forecast and the UK economy has improved since then with the reopening.
The figures were boosted by the return of schools, with child numbers adding to the education activity numbers, but there was also a strong bounce in retail sales for March, before stores were reopened. Construction was another positive for the UK economy an 8% gain for February and March. The BoE said last week that the UK would see 7.2% GDP this year and that the country would see pre-virus activity returning by the end of this year.
ING also said that manufacturing firms have reported less issues with the Brexit export agreement:
“This tallies with recent ONS survey data, which has shown a marked fall in the number of ‘exporting’ manufacturing firms reporting challenges with UK or overseas border disruption over recent weeks.”
Economists dissect the Aussie Federal budget
A big spending Australian budget was released on Tuesday and analysts have been studying the outlook.
Westpac Chief Economist Bill Evans said:
“The May 2021 Budget confirmed that the Budget deficit for the 2020/21 financial year while still sizeable, at a forecast $161 billion, is considerably lower, by some $36.7 billion, than the $197.7 billion forecast by the Government in December”.
The government has elections coming and criticism has bene levelled for a ‘spend now, care later’ plan. Despite this, the Fitch ratings agency were upbeat and the government is within any ceiling for spending:
“In our view the government’s plans to support employment and firm-up the post-Covid economic recovery through tax cuts and job-creation measures, should help boost medium-term growth, which in turn is positive for the medium-term debt trajectory,” a Fitch spokesperson said.
The Australian economy has been strong but the vaccination campaign was slow and more recently, the country has seen renewed tensions with its key trading partner China.
The AUDGBP pair has been trapped the trading range of 0.8500 to 0.8600 since the end of January and the balance of power keeps switching between the pound and the Aussie dollar. Sterling has the upper hand once more and the country will reopen while Australia goes into the flu season with a government that enforces two week lockdowns over two cases in a quarantine hotel.