The Pound Australian Dollar (GBP/AUD) exchange rate weakened on Thursday, as the final Q3 UK GDP data printed below expectations.
At the time of writing, GBP/AUD traded at around AU$1.7928, a decline of roughly 0.4% from Thurday’s opening rates.
The Pound (GBP) saw mixed trade on Thursday, as the final Q3 GDP data printed below initial expectations.
The quarter-on-quarter data printed at -0.3%, down from a preliminary figure of -0.2%, the data sparked further recession fears among investors as analysts began to pore over the results. Furthermore, year-on-year GDP data showed that GDP had fallen to 1.9%, down from the preliminary reading of 2.4%.
Further weighing on the Pound was further information of how the waves of industrial action have begun to affect UK businesses. Pubs and restaurants within London reported that sales were down to nearly half of pre-pandemic levels during rail strikes. As such, the lack of potential for the strikes to wind down may have caused concern to GBP investors.
Similarly, UK firms began to outline the impacts of Brexit. 77% of UK firms have stated in a survey conducted by the British Chambers of Commerce that the deal currently struck had not helped them to increase sales or expand in a meaningful way.
With the UK economic situation continuing to deteriorate, Sterling was an unattractive prospect to investors despite a risk-on market impulse.
The Australian Dollar (AUD) saw support during Thursday’s session, as positive risk appetite took hold across markets.
The shift in appetite comes from Wednesday’s positive consumer confidence data for the US, which saw investors shift away from safe-haven currencies and towards more immediate returns on investments. Due to the world’s largest economy seeming to be in rude health, optimism became abound as markets wind down for the holiday season.
However, the ‘Aussie’s gains were potentially capped due to its nature as a Chinese proxy-currency. Covid cases and deaths have continued to weigh on the economic powerhouse, with Chinese hospitals reporting a gruelling battle against the virus ahead. As such, concerns are have increased over how the country’s economy will begin to recover as it continues to exit from mass lockdowns.
Looking ahead for the Pound, macroeconomic data through to the end of the week is very scarce. As such, investors are likely to shift focus towards domestic headlines within the UK.
With industrial action continuing in the run up to the holiday season, and with little sign of negotiation, investors may grow more concerned about the impact the strikes will have on the UK economy. As such, Sterling may weaken if investors elect to move away from the currency.
For the Australian Dollar, the same lack of data may shift focus towards Chinese headlines due to the ‘Aussie’s nature as a Chinese proxy-currency.
With Covid cases and deaths continuing to rise in China following the country’s exit from it’s zero-Covid policy, the impact this will have on both the Chinese economy and global public health may prompt risk-averse trade, which would see the risk-sensitive ‘Aussie’ fall.
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