The pound was able to climb against the Australian dollar (GBP/AUD) on Friday after the Reserve Bank of Australia (RBA) downgraded its growth forecasts and UK economic data emerged.
Sterling enjoyed an upswing against the Aussie as markets digested RBA comments; the central bank cut growth expectations by 25 percentage points, meaning the economy is forecast to register growth of 3.25% by 2019. The previous estimate had been more upbeat, expecting 3.5% expansion. In addition, the RBA expects inflation to remain below the 2.0% target until the end of 2019, which would mark the fourth year of missing its goal.
The RBA also commented on the labour market, suggesting that it was unclear how much slack was left in the labour market, meaning wage stagnation could persist.
The central bank said: ‘Both these factors affect the outlook for inflation and household income growth, which is a key driver of consumption and therefore the gross domestic product growth forecast.’
Meanwhile, in the UK, trade balance data showed Britain’s deficit shrank by -£700 million in September to £2.75 billion. The decline occurred as UK exports to Europe increased.
The Office for National Statistics (ONS) said:
‘Exports of goods to EU countries increased by £0.9 billion (2.2%) between the three months to June 2017 and the three months to September 2017. The main contributor was increases in exports of transport equipment (predominantly cars), which increased by £0.7 billion.’
Additionally, UK industrial production rose from 1.8% to 2.5% in September on the year. UK growth estimates are due out later in the day and could influence the GBP/AUD exchange rate further.
The Australian dollar to pound sterling (AUD/GBP) exchange rate is residing at 0.5825. The GBP/AUD exchange rate is currently trending around +0.35% higher at interbank levels of 1.7165.