GBP/AUD surges on Wednesday, with the Aussie losing ground after the Australian Bureau of Statistics (ABS) released GDP data for the third quarter. Besides, the AUD struggles amid weakening trade optimism.
Currently, one British pound buys 1.9057 Australian dollars, up 0.45% as of 6:32 AM UTC. Thus, the pair is extending the bullish trend that started yesterday, recovering more than half of the losses caused by a downtrend that lasted from November 29 to December 3. On larger timeframes, the price continues to move in ups and downs since mid-November, showing no clear trend.
Australian economy slowed in the third quarter, as interest rate cuts couldn’t boost consumer spending. The markets anticipate that the central bank will have to maintain its easing stance next year.
In the three months through September, GDP rose 0.4% compared to the second quarter, while analysts expected 0.5%. In annual terms, the economy expanded by 1.7%, in line with economists’ forecasts.
The ABS report on the GDP growth comes a day after the Reserve Bank of Australia (RBA) held interest rates at 0.75% after three cuts since June.
The quarterly GBP gain is way below the RBA’s expectation of a rise close to 0.7%. The sluggish growth also puts pressure on Prime Minister Scott Morrison, who implemented a series of tax cuts in July, hoping that the move would boost the economy so that a significant fiscal stimulus was not needed.
Nevertheless, households were reluctant to spend. The 0.1% increase in consumption was the weakest since the global financial crisis in 2009.
National Australia Bank (NAB) economist Kaixin Owyong commented:
“This suggests that the underlying health of the economy has deteriorated further and is likely to put upward pressure on the unemployment rate. That reinforces our view that further monetary easing is needed.”
NAB is the last of Australia’s big four banks to lower its interest rate forecast for 2020. The bank now predicts two rate cuts next year – in February and June – which would take the benchmark rate to 0.25%.
NAB economists said:
“We think monetary policy will have to continue to do the heavy lifting given that there has been little response to date on the fiscal front.”