The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was little changed as UK GDP data came in as forecast.
The GBP/AUD exchange rate hit a session high of 1.981
According to the London based Office for National Statistics (ONS) second estimate, the UK economy expanded by 0.5% on a quarter on quarter basis in the three months leading to December. The figure matched economist expectations.
On an annual basis, the data showed that the UK economy expanded by 2.7%, the number matched expectations.
The data also showed that total business investment fell by a seasonally adjusted level of 1.4% in the three months to December. The number disappointed analysts who had been expecting a gain of 1.9%. The index of services meanwhile rose by 0.8% in the fourth quarter, beating expectations for a figure of 0.7%.
The Australian Dollar gave up gains made in the previous session after domestic economic data showed that capital expenditure fell sharply in the December quarter. According to the Australian Statistics Bureau, business investment fell by 2.2%, a larger decline than the 1.6% drop forecast by economists. The report also showed that further falls in investment are likely over the coming financial year.
The weak data caused investors to raise their bets that the Reserve Bank of Australia will cut interest rates at next month’s policy meeting.
‘Our expectation is the RBA will cut the rates next week and this data firms our belief. My expectations are that the Australian Dollar will fall further. The domestic economy story is not that good and rate differentials people are rapidly diminishing,’ said Daniel Been from ANZ Banking Group.
Further losses for the ‘Aussie’ were restrained as Wednesday’s positive Manufacturing PMI release from China continued to offer support. The flash HSBC/Markit PMI rose to a reading of 50.1 in February, above the level that divides growth from contraction. Economists had been expecting a figure of 49.5.
Comments made by US Federal Reserve Chair Janet Yellen also aided the ‘Aussie’ as they weakened the US Dollar. On Wednesday, Yellen reiterated to the Financial Services Committee that wage growth and inflation would have to rise before the central bank begins to hike interest rates.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate hit a session low of 1.966
Market attention will now turn to US Data due later in the session.
