The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate weakened to its lowest level in a month on Tuesday as more disappointing data out of the UK caused traders to raise their bets that the Bank of England will refrain from raising interest rates anytime soon.
Positive economic data from China and better than forecast domestic Australian data also buoyed the ‘Aussie’ and allowed the Trans Tasman currency to rally against a number of its most traded peers. Against the US Dollar, the ‘Aussie’ made its sharpest gains in three months.
Data released by HSBC/Markit showed that activity in the Chinese service sector improved in December. Activity rebounded from a four-month low in December for the PMI to rise to 53.4, a figure that is comfortably higher than the 50 mark, which divides expansion from contraction.
The Australian Dollar rose after the release of domestic data, which showed that the nation’s trade deficit widened to A$925 million. Despite the increase, the widening was far less than economist expectations for a figure of A$1.6 billion.
Also supporting the ‘Aussie’ is the ongoing uncertainty in Europe and Latin America.
‘You would expect the Australian dollar to be weaker rather than stronger but it’s bucked the trend … we’re an island of stability compared to what’s happening in the Northern Hemisphere. In these current times when investors are concerned about the outlook for Europe, it’s actually just consolidating the Aussie dollar’s role as a safe-haven currency. That may seem a bit peculiar to most people but we’re in a part of the world that’s relatively stable compared with Europe, Latin America, Eastern Europe,’ said Craig James, Commsec chief economist.
UK Service Sector Growth Slows to 19-Month Low
The Pound weakened to its lowest level in a month against the ‘Aussie’ and also declined against the majority of its most traded peers after data released by Markit/CIPS showed that activity in the UK’s dominant services sector fell sharply in December.
The services PMI fell from November’s figure of 58.6 to 55.8 in December, the lowest number seen since May last year and was the sharpest decline in four years.
Following the release of the PMI data, the GBP/USD exchange fell to a 17-month low and fell to a 1-week low against the Euro.
