The Pound (GBP) was weaker against the Australian Dollar (AUD) and New Zealand Dollar (NZD) on Friday after it was weighed upon by the release of a weaker than forecast Service Sector Purchasing Managers Index (PMI) report.
Early in the session, the Australian Dollar came under pressure from the release of softer than expected domestic data and a Non Manufacturing PMI report out of China.
The September AIGroup Services Index fell four points to a reading of 45.5 points, damaging hopes that the index would return to expansion territory and push higher from the preceding month’s figure of 49.4.
Chinese data also weighed as it showed that service sector activity in the world’s second largest economy slowed in September. The purchasing managers index (PMI) of the non-manufacturing sector posted at 54% last month, down 0.4 % from August, according to a report jointly released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing.
Risk aversion also put some pressure on the currency to send it lower against the US Dollar. Concerns over the pro-democracy protests in Hong Kong and Australia’s announcements that its fighter jets will join military strikes against Islamic State also weighed.
UK Service Sector Softens
Sterling fell against both the Trans-Tasman currencies as data showed that activity in the UK’s dominant Service Sector eased in September and a broader measure of private-sector expansion fell to a six-month low.
The Markit compiled Services PMI fell to its lowest level in three months to a reading of 58.7, a drop from Augusts nine-month high of 60.5 and was a steeper drop than economists had been expecting. In a PMI, any figure above 50 indicates expansion, whilst a number below indicates contraction.
The data added to comments made on Thursday by Bank of England policy maker Ben Broadbent who said that the strength of the UK economy does not warrant the raising of interest rates.
‘The worry is that the economy could slow faster than anticipated. This adds to the case for interest rates to remain on hold until next year, and at least until there are clear signs of wages and household incomes rising in real terms,’ said Markit’s chief economist Chris Williamson.
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast
The softer than forecast service PMI data is likely to keep the Pound softer against the Australian Dollar and New Zealand Dollar for the rest of the session.
The South Pacific currencies are forecast to weaken further against the US Dollar however as the markets predict that the latest US Non-farm Payrolls data will come in strongly and boost the ‘Greenback’.
Australian Dollar (AUD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Australian Dollar,
,US Dollar,1.1392 ,
Australian Dollar,,Pound Sterling,0.5457 ,
Australian Dollar,,Euro,0.6949 ,
Australian Dollar,,New Zealand Dollar,1.1165 ,
US Dollar,, Australian Dollar ,0.8783 ,
Pound Sterling,, Australian Dollar ,1.8310 ,
Euro,, Australian Dollar ,1.4381 ,
New Zealand Dollar,, Australian Dollar ,0.8953 ,
[/table]
