GBP/AUD Rate Trades Close After UK Budget Disappointment
The Australian Dollar Pound is in a range today. A disappointing spring budget and mixed PMI figures weigh on the pound (GBP). A decline in global risk appetite is likely to limit the Australian dollar’s (AUD) gains.
At the time of writing, the GBP/AUD exchange rate is hovering around $1.7610, virtually unchanged from this morning’s numbers.
British pound (GBP) exchange rate down after disappointing spring budget
The Pound (GBP) is struggling to make headway against many of its rivals today. The poor reception of the UK’s spring budget announced on Wednesday weighs on the pound sterling. Last week’s dovish outlook for the bank of england (BoE) also continues to dictate bets on the pound.
The Resolution Foundation think tank pointed to the lack of support for low-income families in the spring budget. Chancellor Rishi Sunak’s statement on Wednesday promised a 1p cut in income tax, a 5p per liter cut in fuel tax and other measures.
Torsten Bell, chief executive of the think tank, said:
“The bigger picture is that Rishi Sunak has prioritized rebuilding his tax-cutting credentials over supporting low-to-middle income households who will be hardest hit by the soaring cost. of life, while leaving some flexibility in the years to come.
The mixed PMI numbers may have helped limit the pound’s significant gains today. The UK services sector PMI beat forecasts to hit a nine-month high of 61. The country’s further reopening of the economy following Covid-19 restrictions boosted restaurant bookings and dining out.
On the other hand, the outlook for the country’s manufacturing sector could still drag the pound lower today. UK manufacturing output hit its lowest level in five months, printing below forecast at 55.5.
Last week’s dovish BoE outlook is likely to continue to weigh on the pound this week. After an interest rate hike of 0.25%, the central bank said a “modest policy” of monetary tightening would be considered in the coming months.
Australian Dollar (AUD) Exchange Rates Fall Despite Positive PMIs
The Australian Dollar (AUD) is trending lower against many of its competitors today. A pullback in commodity prices is likely to hurt the Aussie’s gains. A decline in global risk appetite could also weigh on the AUD today as hostilities in the Russia-Ukraine conflict continue to escalate.
Efforts for peace talks between the two sides have taken a back seat in recent days as fighting between Ukrainian and Russian military forces intensified. Ukrainian officials have recently claimed a number of successful counterattacks, including a strike on a Russian landing ship in Berdyansk.
Reports indicate that Russian forces have stalled in their attacks on kyiv, but recent defensive positions indicate a willingness to continue their offensive.
Wednesday’s better-than-expected PMI numbers may help limit significant losses for the Australian dollar today. The PMIs for the manufacturing and services sectors exceeded forecasts, 57.3 and 57.9 respectively, after the country’s borders reopened in February. Manufacturing companies reported that a decrease in Covid-19-related disruptions helped the growth in new orders in March.
Jingyi Pan, associate director of economics at S&P Global, was quick to point out a potential deterioration in the outlook in the coming months:
“Price pressures have been mounting, however, unsurprisingly compounded by a host of issues including flooding in Australia, war in Ukraine and wider supply constraints. It will be worth watching in the future. future, as business confidence among private sector companies is clearly impacted by concerns about rising costs.
GBP/AUD Exchange Rate Forecast: Will UK Retail Sector Struggle Amid High Inflation?
Looking ahead to the rest of the week for the British pound, an expected fall in February retail sales could pull the currency lower on Friday.
Absent more meaningful data for the Australian dollar, the currency’s movements will likely continue to be driven by volatility in commodity prices and global risk appetite.