Disappointing Construction PMI Dents Australian Dollar (AUD) Exchange Rate
As the Australian Construction PMI fell further into contraction territory in March the appeal of the ‘Aussie’ (AUD) has diminished. Consequently the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has been trending narrowly around 1.8554.
Earlier…
Confidence in the Australian Dollar (AUD) has strengthened on the back of the latest Chinese economic data as worries over the future of the UK steel industry hold back the Pound (GBP).
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Boosted after RBA Hold Rates
Demand for the Australian Dollar (AUD) declined on Tuesday in spite of the Reserve Bank of Australia (RBA) opting to leave interest rates on hold for another month. Governor Glenn Stevens expressed some concern over the relative strength of the ‘Aussie’, in spite of the central bank still seeming less inclined to loosen monetary policy. The antipodean currency slipped in response. As the day also saw the Australian trade deficit unexpectedly widen and the domestic Services PMI fall into contraction territory the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was encouraged to trend higher.
While the UK Services PMI showed a stronger uptick, the mood towards the Pound (GBP) remained generally muted by concerns regarding the negative impact of ‘Brexit’ uncertainty. Expectations are still for the first quarter to show a slowdown in GDP, with an apparently high likelihood of economic growth to stall further in advance of the June referendum. Nevertheless, with markets in the grip of risk aversion Sterling benefitted from the day’s ‘Aussie’ weakness.
Improved Chinese Economic Outlook Bolsters Australian Dollar (AUD)
The Chinese Services and Composite PMIs proved cause for a market rally this morning, as the world’s second largest economy demonstrated signs of improvement. Investors were encouraged by the prospect of China’s transition from a manufacturing-led to service-based economy proving smoother than previously feared after data showed the services sector expanded at a faster pace than expected. The stronger showing also discouraged speculation of an imminent hard landing, boosting demand for commodities and higher-risk assets.
Confidence in the Pound slumped sharply as markets maintained a predominantly bearish view of the currency. Although there are thought to be multiple parties interested in the British steelworks, which Indian conglomerate Tata Steel is looking to divest itself of, the future of the industry remains far from secure. With Business Secretary Saijd Javid in Mumbai to confirm the timeframe for which Tata is prepared to keep hold of its UK assets there are concerns that the government could have just weeks to secure new ownership of the sites. As a result the Pound has trended lower across the board.
GBP/AUD Exchange Rate Forecast: Fed Comments Predicted to Rally ‘Aussie’
Tonight’s Federal Open Market Committee (FOMC) meeting minutes could trigger some additional volatility for the ‘Aussie’. Although subsequent commentary from policymakers has no doubt diminished the impact of the minutes, markets will still be interested to see what evidence there is of dissent amongst the FOMC. It does seem increasingly unlikely that the Fed will consider a more imminent interest rate hike, with any confirmation of this expected to bolster the Australian Dollar.
On Friday the latest UK industrial and manufacturing production figures could soften the Pound, with forecasts pointing towards a renewed decline in output. The February trade balance may prove further grounds for a Sterling rally, however, should the trade deficit be found to have narrowed on the month in spite of wider market turbulence.
Current GBP, AUD Exchange Rates
At the time of writing, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was slumped in the region of 1.8610, while the Australian Dollar to Pound Sterling (AUD/GBP) pairing was making gains around 0.5372.
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