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Pound Australian Dollar Exchange Rate Steady as UK Factory Output Soars

Published: 22 Jul at 3 PM Tags: Pound Sterling, Dollar Exchange Rate, Australian Dollar Exchange Rate, Currency Exchange, UK, Exchange Rates, Economy, Inflation,

The Pound to Australian Dollar exchange rate held steady today following the release of the latest UK factory output and orders data, which surged at its quickest rate since 1974. The pairing is currently fluctuating around AU$1.86.

Rain Newton-Smith, the chief economist at CBI, however warned:

‘Businesses have already endured a prolonged period of inhibited demand, so it is vital that government now takes all possible steps to protect this resurgence in activity.’

Today also saw the Bank of England’s (BoE) deputy governor, Ben Broadbent, confirm the bank’s dovish stance on inflationary pressures being temporary.

Broadbent commented that the bank would react if the cost of living exceeds its 2% target, saying:

‘Quite a bit of the current rise in inflation is actually coming directly from the higher price of oil, something that is likely to fall away through the early part of 2022.’

The Australian Dollar (AUD) struggled today after the latest National Australia Bank business confidence report for the second quarter fell below forecasts from 19 to 17.

Alan Oster, NAB Group chief economist, was more upbeat, however, saying:

‘A pleasing aspect of the survey is how broad-based the strength in conditions and confidence was – whether you look by industry or by state they are all above average, and in many cases well above.’

Rising cases of the Delta variant of the coronavirus has however weighed on demand for the risk-sensitive ‘Aussie’.

With the outlook for the global economy looking increasingly uncertain, we could see the Australian Dollar suffer from souring risk sentiment this week and next.

Later today will also see the release of Australia’s flash Commonwealth Bank services and manufacturing data for July.

Could an uptick in Australia’s economic growth provide a boost for the AUD/GBP exchange rate late this evening?

Looking ahead, Pound investors will eye tomorrow’s preliminary manufacturing and services PMI report for July. Any improvement in the outlook for the UK’s economy this quarter would be GBP-positive.

However, if Covid-19 infections and hospitalisations continue to rise throughout England, then we could see the Pound to Australian Dollar exchange rate fall on heightened concerns over the future for the British economy.