The GBP AUD exchange rate was 0.63% higher on Friday and starts the week with resistance. Iron ore prices weigh on the Aussie dollar and commodities across the board slipped from recent highs.
The GBP to AUD rate traded near the 1.7800 level which capped gains in the pair since the end of April. The pound sterling needs to push beyond that level for a sustained rally.
The Australian mining sector continues to provide the fuel for growth
According to forecasts, Australia’s mining and energy exports will grow by another 3% to a record A$419 billion over the near year. The country experienced a boost, thanks to surging revenues in coal and gas from Russian sanctions.
Prices for LNG and coal hit record highs this year. After being criticised for their coal use in recent years, governments such as the UK and Germany will use coal to replace Russian fuel.
“The outlook is for the prices of energy commodities to remain strong for longer than previously forecast, as Western nations look for alternatives to Russian energy supplies,” the Department of Industry said.
The previously booming industry may see some tightening due to higher interest rates.
According to the figures, exports of coal for power generation will jump by 15% to A$44 billion due mainly to higher prices. Australian coal may become the main alternative for countries looking to cut Russian imports.
“With inventories of energy in the Northern Hemisphere well below normal, any supply disruptions will result in more price surges,” the DoI added.
Central bank comments could drive the pound sterling
The pound sterling versus the Aussie dollar will look to central bank comments this week for direction.
Governor Andrew Bailey speaks on Wednesday, with the Chief Economist talking on Thursday. Last week, Governor Bailey said that the UK faces a “very large national real income shock”. He added that the country was at a “turning point” rising inflation and a drop in income.
Mr Bailey said that the hit to Britain’s economy would be “very substantial”.
“The UK economy is probably weakening rather earlier and somewhat more than others. The UK economy is probably weakening rather earlier and somewhat more than others.”
The Bank of England hiked interest rates to counter a rise in inflation, but that is choking off growth in the country’s economy. House prices potentially peaked. Lower real wages mean less disposable income all around for UK consumers.
Inflation continues to rise. Further hikes in energy prices in October will add to the pain. The UK will witness a backlash in industrial action from public workers, with rail workers, postal, and teachers considering strikes in the coming months. The tech firm BT will also stage a walkout over the small wage hikes being offered.
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