Pound Australian Dollar (GBP/AUD) Exchange Rate Flat As UK Economy Stalls (2024)

The Pound Australian Dollar (GBP/AUD) exchange rate traded in a narrow range on Wednesday, amid news that the UK economy had stalled in April.

At the time of writing, GBP/AUD traded at around AU$.19281, showing little movement from Wednesday’s opening rates.

Pound (GBP) Muted as UK Economy Stalls

The Pound (GBP) struggled to attract support from investors on Wednesday, following the release of the latest UK GDP data.

In April, the UK’s economy stagnated, and showed a clear slowdown in activity by printing at 0%, down from a growth rate of 0.4% in March.

The predominant reason for the UK’s stall in activity was considered to be poor weather throughout April, which had a detrimental effect on both retail and construction sectors.

Hailey Low, associate economist at the National Institute of Economic and Social Research, commented: ‘Today’s subdued GDP figures signal that the UK remains fragile on its route to a sustained economic recovery. However, the broader perspective remains an economy grappling with stagnation as low productivity and high economic inactivity curtails growth potential.’

However, GBP likely remained afloat on Wednesday due to an upbeat market mood. As the Pound is an increasingly risk sensitive currency, it was able to remain cushioned against its peers despite the gloomy reading for the economy.

Furthermore, the data may not have been enough to push the Bank of England (BoE) into cutting interest rates before markets currently anticipate, which may have served to underpin Sterling.

Australian Dollar (AUD) Pressured by Underwhelming Chinese Inflation

The Australian Dollar (AUD) traded in a muted capacity on Wednesday, following the release of the latest Chinese inflation data.

Headline inflation printed at 0.3% in May, remaining unchanged from the previous month’s reading. This was beneath market expectations of a rise to 0.4%, which suggested that consumption remained tepid in the economic superpower.

Zhou Hao, Chief Economist at Guotai Junan International, commented: ‘For investors, the key question is whether China's PPI inflation could turn positive in the second half of this year, given the recent rise in commodity prices, particularly copper. Overall, today's inflation report suggests that a moderate reflation is still ongoing, while a low inflation is likely to remain the base case.’

Additionally, Chinese producer price inflation printed at -1.4% on a monthly basis, showing that prices continued to ease amongst manufacturers in China.

This showed that the economic superpower’s post Covid recovery remained underwhelming, and suggested that the Chinese government may have more work to do in order to support the economy.

Due to the Australian Dollar’s nature as a Chinese proxy currency, the data weighed on it and prevented it from capitalising on a risk positive market mood during Wednesday’s session.

Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: Australian Data in Focus

Looking ahead for the Australian Dollar, Thursday is set to bring two pieces of data which may have an impact on the currency.

Firstly, the latest Westpac consumer confidence data is due for publication, reflecting sentiment in June. Markets forecast that confidence amongst Australian consumers will have ticked lower on a monthly basis, falling to 82 from May’s reading of 82.2.

This could unsettle AUD by indicating a softening of sentiment amongst consumers, which may further indicate a slowdown in spending.

However, this release is likely to be countered by the latest Australian unemployment data. In May, the unemployment rate is forecast to have fallen from April’s reading of 4.1% down to 4%.

This could indicate strength in the Australian employment market, which may further boost AUD by suggesting that the Reserve Bank of Australia (RBA) still has room to hike interest rates if at all needed.

For the Pound, meanwhile, data releases are set to taper off through to the end of the week’s session. This is likely to leave the increasingly risk sensitive currency to trade at the behest of the market mood.

If trading conditions deteriorate, the Pound may weaken against more resilient currencies, but it may still edge above the ‘Aussie’ as AUD is a more risk sensitive currency.