The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate slipped to its lowest level in a month as disappointing UK economic data continued to weigh heavily.
Earlier in Tuesday’s session the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate fell close to its lowest level in a month on Monday as the UK currency was dragged lower by weaker than forecast construction PMI data.
The report caused investors to raise their bets that the Bank of England (BoE) will refrain from raising interest rates until late in the year as the British economy shows signs of a slowdown.
As the session progressed the Pound to Australian Dollar (GBP/AUD) exchange rate weakened further as the disappointing UK PMI data continued to weigh.
Earlier the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate softened on Monday after economic data showed that UK construction PMI fell to its lowest level since July 2013.
Construction sector activity in the UK grew at its slowest pace since 2013 according to data compiled by Markit. The report disappointed economists and led to the Pound softening against the ‘Aussie’ and other major peers.
According to the Markit/CIPS construction PMI report activity fell to a reading of 57.6 in December from 59.4 in November, a figure, which was still strong but below economist, forecasts for a slight dip to 59. In a PMI report, any figure above 50 indicates expansion whilst a figure below 50 indicates contraction.
‘While new business growth moderated to its lowest for a year and a half in December, UK construction firms are still highly upbeat about their prospects for output growth in 2015,’ said Tim Moore, senior economist at Markit.
Markit added that 2014 still marked the best year for British house building since it started collecting records in 1997, news likely to cheer the government which has made boosting this a priority in the run-up to May’s national election.
Construction makes up 6% of the British economy.
Australian Dollar to US Dollar Exchange Rate Falls to Five-Year Low
Against the US Dollar, the Australian Dollar tumbled to its lowest level in five years and most economists forecast that further declines are in store as demand for the ‘Greenback’ continues to surge.
Expectations that the Federal Reserve is moving closer to raising interest rates has buoyed demand for the world’s most traded currency.
‘It is the US Dollar that is being the driving force and it is not against just the Aussie Dollar, it is the Euro and the Japanese Yen too. This is all because the US economy is stronger. You have annualised growth of about 5% compared to out 3% and they are preparing to lift interest rates, which will narrow the gap between Australia’s interest rates. Clearly the investors around the world believe the best place to put your money now is in the stronger ‘Greenback’,’ said Craig James from Comsec.
Some economists are forecasting that the ‘Aussie’ could fall by another 10 cents against the US Dollar (AUD/USD) over the coming months.
