The AUDGBP exchange rate was 0.07% lower Tuesday as the British economy saw borrowing figures coming in slightly better than expected. The Aussie dollar has slumped recently as the Chinese government aimed to crackdown on speculation and manipulation in iron or prices, which is the largest Australian export.
The AUD to GBP rate trades at 0.5472 with the potential for support at the 0.5462 level.
UK April borrowing lower than last year
UK April borrowing reached its second highest ever, but the figures were still lower than last year
Public sector net borrowing for the UK last month was estimated to be £31.7bn, newly released figures from the Office for National Statistics detailed. The number £15.6bn less than in April 2020, when the country borrowed around £47bn during the first wave of the pandemic.
The number is still the second highest April borrowing figures since the monthly records began in 1993, because of the ballooning costs of the pandemic, such as the NHS Test and Trace programme, and the vaccine rollout. The furlough programme was also a big hit to the public purse.
However, the number is less than the £39bn which the OBR had laid out during the March pre-budget forecasts.
Conservative MP John Redwood said of the figures:
“Time to lift the threat of higher U.K. taxes. April numbers show extra state borrowing down on last year even before full recovery is underway. More growth is the way to get the deficit down. Official forecasts of new debt are too pessimistic.”
The reopening of the country’s economy has helped to reduce the government borrowing figures.
Iron ore prices weigh on the Aussie despite record exports
Australian iron ore shipments to China saw another record high in April, helping to lift overall Australian exports to an all-time high of $36 billion.
The ABS said preliminary figures showed the nation’s trade surplus at $10.1 billion, the third highest goods surplus on record. The ABS said:
“Following strong exports in March 2021, metalliferous ores increased another one per cent in April 2021 to record a historic high of $16.5 billion, driving record high exports”.
Despite the stronger figures, the Aussie dollar is being hit by a drop in iron ore prices as China seeks to curb the price rises at a time of record imports.
“Iron ore prices have fallen sharply in recent days as China clamps down on speculative behaviour in the steel industry, weighing on mill profitability,” said senior economist Ryan Felsman.
The federal budget earlier this month saw the Treasury predicting iron ore prices to remain elevated for an extended period due to the Chinese demand, but this is now not the case as the wind gets sucked out of the iron ore sail.
The AUDGBP pair saw a bounce at the November 2020 lows at 0.5460 and this has the potential for a bottom in the pair in a quiet week for economic data.