The Pound (GBP) firmed against the Australian Dollar (AUD) and the majority of other major peers on Tuesday as the latest UK Services PMI report shocked economist by surging to its strongest level in 8-months and showed a record pace of job creation.
Earlier in the session the Australian Dollar firmed against the Pound due to the Reserve Bank of Australia choosing to leave interest rates unchanged at the record low level of 2.5% and hinted that no further rate cuts are likely.
The ‘Aussie’ was weakened after data out of Australia’s biggest trading partner, China came in below economist expectations.
The Chinese Services report showed that the sector softened in July as the PMI dropped from June’s reading of 53.1 to 50.0 in July.
A Composite PMI also dropped from a fifteenth month high of 52.4 to 51.6.
‘The weakness in the headline number likely reflects the impact of the ongoing property slowdown in many cities as property related activity, such as agencies and residential services see less business,’ said Hongbin Qu, HSBC’s China chief economist.
Also weighing upon the ‘Aussie’ was another report which showed that the nation’s trade deficit narrowed to $1,683 million in June, down from the previous figure of $2,043 million.
As the session progressed the Australian Dollar regained ground against Sterling and managed to hold a two-day gain against the US Dollar (USD) after the Reserve Bank of Australia (RBA) left its key interest rate unchanged at 2.5% and reiterated that it expects to see a period of interest rate stability.
The decision was widely forecast by economists.
Commenting on the decision, RBA Governor Glenn Stevens said ‘the most prudent course is likely to be a period of stability in interest rates.’ Notably Mr Stevens did not try and talk down the value of the currency, something that in previous months has been highlighted an issue for the Australian economy.
Australian Dollar to Pound Sterling Exchange Rate Forecast
The Australian Dollar is forecast to recover some ground against the Pound and other peers on Wednesday as economists expect the day’s Australian employment data to show that the number of new jobs created in the country continued for a second consecutive month.
‘The statement suggests the RBA is playing a very straight bat and waiting for fresh data. I like the ‘Aussie’ higher short term, and expect a push towards the 93.80 cents level against the US Dollar,’ said Robert Rennie, the head of currency and commodity strategy at Westpac Banking Corp.
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,0.9335 ,
Australian Dollar,,Pound Sterling,0.5536 ,
Australian Dollar,,Euro,0.6960,
Australian Dollar,,New Zealand Dollar,1.0949 ,
US Dollar,, Australian Dollar ,1.0712 ,
Pound Sterling,, Australian Dollar ,1.8047 ,
Euro,, Australian Dollar ,1.4363 ,
New Zealand Dollar,, Australian Dollar ,0.9129 ,
[/table]
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