The GBP AUD exchange rate was a little higher on Thursday with the resistance ahead at 1.7800 still in play but the market lacks a catalyst. British inflation came in at analysts’ predictions and the market may wait for further central bank comments. The UK is still locked in a rail strike as the second walkout goes ahead as planned. Data shows Australians are gloomy about the economic outlook.
The GBP to AUD rate was trading at 1.7725 with traders unwilling to push the pound much higher after a recent bounce.
Aussies more worried about economy than 1991 recession
Consumer confidence plummeted to the lowest levels since the 1991 recession in Australia, according to the latest data.
The weekly ANZ Roy Morgan figures were the worst in the index since records began. The latest numbers also showed the biggest drop in weekly terms for 30 years.
The numbers come after the Reserve Bank hiked rates by 0.50% and said there was more to come. This is a tough reality for Australian homeowners that dove into the market with two feet due to low rates and soaring prices.
Consumer confidence dropped by 7.6% to 80.6, which is 30 points lower than one year ago. Confidence figures were also low during the pandemic lockdowns, but they bounced back quickly with the reopening.
The current index is showing deeper seated fears as interest rates pressure homeowners and inflation also hurts their wages. It is a double-edged sword that the UK economy is also facing. However, Australia’s housing bubble was larger after the country dodged the last recession during 2008-09 due to its commodity exports to China.
“So far this year household spending has been resilient despite the softness in consumer confidence,” David Plank of ANZ said.
“The RBA, for one, will be looking closely to see whether this divergence can continue.”
Business leaders warn of ‘incredible damage’ caused by strikes
Business owners and hospitality leaders warned that the continued rail strikes could cause incredible damage to the UK economy.
The second strike went ahead on Thursday. The Centre for Economics and Business Research (CEBR) said the three strikes on Tuesday, Thursday and Saturday could lead to losses of £91m. The worst-hit sectors will be hospitality and retail, which had a chaotic two years due to the pandemic.
In a press release at the beginning of June, Richard Burge, CEO of the London Chamber of Commerce, stated that London “cannot afford a summer of chaos on the railways and tube lines”.
The travel industry and sectors such as hospitals looked forward to finally getting a full summer of business, but the rail strikes and flight troubles across Europe are putting a dampener on the outlook.
“A week lost every month for the foreseeable future is going to do incredible short-term and long-term damage to the economy and the UK’s reputation as an attractive destination for investment,” Mr Burge said.
With no economic data coming before the weekend, the GBP v AUD will likely be quiet as all news seems to be priced in for now.