The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate firmed on Wednesday as domestic Australian and Chinese economic data releases weighed heavily on the ‘Aussie’.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate hit a session high of 1.9855
Already under pressure from expectations that the US Federal Reserve will hike interest rates in the summer, the Australian Dollar gave up ground against the Pound and other major peers as domestic data and data out of China disappointed.
Consumer confidence in Australia slumped back into negative territory after a brief rise last month. The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 1.2% in March to a reading of 99.5. The preceding months figure was 100.7.
‘Some softening in sentiment was always likely in March given the big lift last month following the RBA’s surprise 25-basis-point rate cut. Interest rate moves often generate big initial reactions that dissipates over time,’ said Westpac senior economist Matthew Hassan.
The report also showed that consumers are growing increasingly cautious on buying major household items. The sub-index fell by 5.1% to its second lowest reading since 2009.
Another report published by the Australian Bureau of Statistics showed that home loans declined by 3.5% in the first month of 2015, a figure that was far worse than the 2% decline forecast by economists.
Weak data out of China also put pressure on the Australian Dollar as it showed that industrial production in the Asian nation declined in the first two months of the year. Industrial output was at its slowest pace since the global economic crisis.
‘It’s bad across the board. It shows the economy faces serious difficulties in the near term and there is no sign of a recovery anytime soon,’ said Shen Jianguang, an economist from Mizuho Securities.
Mixed UK Data Restrains Pound Gains
Further gains for the Pound were restrained after Manufacturing Production data came in softer than forecast. Production in the sector slipped by -0.5% on a monthly basis and eased from a revised figure of 2.6% to 1.9%.
Industrial production matched forecasts for a gain of 1.3% on an annual basis but was softer than forecast on a month on month basis as production fell by -0.1%.
The UK currency could see upward movement later in the session as market attention turns to the upcoming NIESR third estimate Gross Domestic Product (GDP) report.
