GBP/AUD Exchange Rate Retreats in Wake of Dire PMI Figures
The Pound to Australian Dollar (GBP/AUD) exchange rate is trading on the back foot this morning on the back of some truly abysmal PMI figures from the UK.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9470, down roughly 0.5% from this morning’s opening rate.
Pound (GBP) Slumps as UK Faces Deep Recession in Second Quarter
The Pound (GBP) is on the defensive against the Australian Dollar this morning as April’s preliminary PMIs revealed a startling plunge in UK economic activity.
According to data published by IHS Markit, the UK’s composite PMI plummeted from 36.0 to a new record low of 12.9 in April, plunged well below forecasts of a more modest slump to 31.4.
The slump was attributed to a deep slump in the UK’s vital services sector, which has faced an unpresented loss of activity due to the coronavirus lockdown.
Today’s PMI figures also show the extent to which the UK economy has been upended by the crisis, with analysts predicting that the second quarter is looking quite ugly in terms of GDP.
Chris Williamson, Chief Business Economist at IHS Markit, comments:
‘Business closures and social distancing measures have caused business activity to collapse at a rate vastly exceeding that seen even during the global financial crisis, confirming fears that GDP will slump to a degree previously thought unimaginable in the second quarter due to measures taken to contain the spread of the virus.
‘Simple historical comparisons of the PMI with GDP indicate that the April survey reading is consistent with GDP falling at a quarterly rate of approximately 7%.’
However, Williamson warns the economic hit could be even larger given that the PMI figures don’t take into account the self-employed and retail sector, which have borne the brunt of the lockdown measures.
Australian Dollar (AUD) Buoyed by Positive Market Mood
Meanwhile, the Australian Dollar (AUD) is on the rise this morning, riding high on the back of a risk-on mood in markets.
While the economic fallout from the coronavirus crisis remains an ongoing concern for investors, improved sentiment in equity markets has helped to give the risk-sensitive ‘Aussie’ a leg up.
This upswing in sentiment is at least partly attributed to a recovery in oil prices, which continue to creep higher after markets were left in a state of shock after WTI crude fell into negative territory earlier in the week.
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