GBP Exchange Rates Dented by Disappointing UK Services PMI
While risk appetite eased on Friday morning this was not enough to prevent the Pound (GBP) from trending lower against both the ‘Aussie’ (AUD) and the ‘Kiwi’ (NZD). Confidence in Sterling was weakened further by January’s UK Services PMI, which was found to have weakened further than forecast. Although the measure remained in a state of growth the loss of momentum within the sector, alongside more signs of rising inflationary pressure, gave investors little cause for optimism.
There was some disappointment from the Australian Services PMI, meanwhile, as sector growth was found to have moderated from 57.7 to 54.5. This dented the appeal of the Australian Dollar, given the push for the domestic economy to rebalance from its reliance on the mining sector in favour of services. Nevertheless, the index remained well above the neutral baseline of 50, indicating a fair degree of resilience within the sector.
The ANZ commodity price index also proved disappointing, diminishing demand for the New Zealand Dollar ahead of the weekend. Weaker commodity prices do not bode overly well for the outlook of the economy, although its underlying fundamentals have proved robust in recent months. Worries over US protectionism have equally weighed on the risk-sensitive ‘Kiwi’, especially as the US Dollar (USD) strengthened ahead of the latest non-farm payrolls report.
RBA, RBNZ Policy Decisions to Provoke Australian and New Zealand Dollar Volatility
Further volatility will be in store for the GBP AUD and GBP NZD exchange rates next week, with both the Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) delivering their latest interest rate decisions.
While no change is expected from either central bank investors will be paying close attention to the sentiment of policymakers, with the recent speculation having pointed towards a growing sense of dovishness within the RBA. If there are any signs that policymakers are returning to an easing bias this could weigh on the Australian Dollar, giving the GBP AUD exchange rate a rallying point.
On the other hand, the outlook of the RBNZ is expected to be leaning towards greater hawkishness. As economists at ANZ noted:
‘Headline inflation has returned to the RBNZ’s target band for the first time in two years, and some measures of core inflation are back at (or close) to 2%; inflation expectations have stabilised / risen; evidence of capacity pressures have intensified (with the exception of Q4 labour market figures); the global economy is looking firmer; the Fed is talking about three rate hikes this year and other central banks are hinting at less inclination to ease; and fiscal expansion has gained greater prominence globally.’
Even though the RBNZ is not likely to raise interest rates imminently any indication that policy is likely to be tightened sooner rather than later could see the GBP NZD exchange rate slump.
Current Interbank GBP, AUD, NZD Exchange Rates
At the time of writing, the Pound Australian Dollar (GBP AUD) exchange rate was trending narrowly at 1.63, while the Pound New Zealand Dollar (GBP NZD) exchange rate was trading in the region of 1.7195.
Comments are closed.