GBP AUD Pushes Higher Despite Weak Manufacturing

GBP AUD Jumps on UK Employment Surprise

The GBP AUD exchange rate was 0.44% higher on Monday with the pair trying to continue a recent rally. Manufacturing figures were pressured by supply chains and inflation in the UK. The country will see the latest government borrowing figures today. Australia also awaits the release of its own inflation number.

The GBP to AUD was pressing higher with a move to almost test the 1.7900 figure.

UK manufacturing industry pressured by costs and supply chains

UK manufacturing confidence dropped at the fastest pace since the first lockdowns, as the Ukraine war and inflation continue to bite.

Business sentiment and export optimism were both lower in April, moving south at the fastest rates since April 2020, due to economic uncertainty and commodity prices.

The balance between UK factories who were upbeat about their business situation, rather than pessimistic, slumped to -34% in April from -9% in January, according to the CBI’s first quarterly Industrial Trends Survey since Russia invaded Ukraine.

The latest figures mark the biggest drop in confidence since April of 2020, during the first wave of the pandemic. Companies also reported that new orders had slowed over the last quarter, and they expect them to keep falling in the next three months- another sign that the economy is slowing.

Cost pressures were higher for businesses, with average costs growing at the fastest rate since July 1975. Firms also hiked their domestic at the fastest pace since October 1979, which will again feed through to consumers instore.

The cost of raw materials was the biggest driver of cost growth expectations in the next three months (80% of respondents said this was extremely important), followed by energy costs (59%), transport costs (41%) and labour costs (38%).

Australia is not the ‘sheriff of the US’ in the Pacific

Former Victorian Liberal Party President Michael Kroger said he does not know if there is much Australia and New Zealand can do if China were to open a military base in Solomon Islands.

“The US have basically made this clear themselves that they are not prepared to tolerate a Chinese base in the Solomons,” Mr Kroger said.

He added it was “not our job” to stop any potential security deal between the two nations.

Australia’s prime minister warned over the weekend that a naval base in the Solomon Islands would be a “red line” for his country in yet more tensions with its key trading partner.

“I share the same red line that the United States has when it comes to these issues,” Morrison said. “We won’t be having Chinese military naval bases in our region, on our doorstep.”

But Solomon Island Prime Minister Manasseh Sogavare announced he had signed an agreement with China that will allow them to send military personnel to his island, and told world leaders to respect his island’s sovereignty.

On the economic front, Australia awaits an important inflation release, with economists forecasting a jump to 4.6% from 3.5%. A high number will stoke Aussie rate hike speculation.