GBP/AUD Exchange Rate Volume Still Low After Disappointing GDP Report In The UK
The GBP/AUD continues to indicate a suppressed performance courtesy of its current range and one of the factors that may have contributed to this is the recently released GDP report which failed to impress.
UK’s GDP growth indicates a slowdown
The GDP data which was released on Monday revealed that GDP growth for the U.K. in April decreased by 0.4%. This makes it the largest monthly GDP fall that the U.K. has experienced since December last year. The GPD performance is contrary to the reported figures for the first three months of 2019 during which the economy registered a 0.3% expansion.
“GDP growth showed some weakening across the latest three months, with the economy shrinking in the month of April mainly due to a dramatic fall in car production,” stated Rob Kent-Smith, the National Statistics’ (ONS) GDP head.
Kent-Smith also cited the UK’s planned exit from the European Union as one of the factors that influenced the automotive manufacturing shutdown. The overall manufacturing industry in the U.K. demonstrated weakness in April which was fueled by the early order completion. This is because manufacturers were in a rush to avoid being inconvenienced by the initial Brexit date.
China’s impact on the AUD’s performance
China also published unappealing market data that probably made investors shy off from the Australian dollar. This held back its performance against the GBP even though the latter was negatively affected by the underwhelming GDP data.
Although China has been affected by higher tariffs due to its ongoing trade war with the U.S., it surprisingly reported an increase in exports in May. However, the figures indicate that imports fell by -2.5% which represents the biggest decline that has been reported in the last three years. This also means domestic demand grew weaker.
Some analysts believe that the higher U.S. import figures from China manifested because Chinese exporters rushed quickly shipped their shipments into the U.S. They likely did this to avoid being caught up by the new tariffs.
The AUD has also faced numerous negative news recently which may have also contributed to its muted response to the UK’s disappointing GDP report. For example, the NAB Business Confidence continues to underperform while goods distribution industries continue to grow weak.
The manufacturing industry is also headed in the same direction. The slew of negative news has investors guessing the Reserve Bank of Australia’s (RBA) next move, especially interest rate cuts.
The GBP/AUD performance moving forward
The RBA implemented a rate cut just a week ago and there might be more similar measures to come. There will likely be more volatility with the upcoming speeches to be made by assistant governors Elis and Kent on Wednesday. The upcoming AU jobs report which is scheduled to be released on Friday will likely influence the direction of interest rates in Australia.
Analysts expect higher expectations for interest rate cuts from investors if the data released on Friday indicates a higher unemployment rate. Across the pond, the GBP remains tied to the political headwinds, particularly the Brexit issue which has prevailed for quite some time.