The Australian Dollar (AUD) exchange rate fell sharply against the Pound Sterling (GBP) and US Dollar (USD) on Wednesday as economic data out of China weighed heavily.
According to HSBC, its Chinese Services Purchasing Managers Index (PMI) for October weakened to 52.9 from September’s figure of 53.5.
Taken on its own the services PMI does not look too bad as it remains above the 50 line, which divides contraction from expansion. However, the composite PMI, which combines activity in both the manufacturing and service sectors, fell to its lowest level in three months from 52 to 51.7.
As China is Australia’s biggest trading partner any signs of a slowdown are seen as a negative on the ‘Aussie’.
‘Both new and outstanding business improved, although the latter remained in contraction. Price pressures diverged as input prices continued to rise while output prices saw a marginal reduction. The employment index remained in stable expansion. Overall, the service sector grew steadily in October as the underlying business conditions continue to look better than in the manufacturing part of the economy,’ said Hongbin Qu, Chief Economist at HSBC.
The softer services PMI is just the latest sign that a slowdown in occurring in the world’s second largest economy. Earlier in the week an official services index showed a decline and decelerating third quarter growth is another factor putting pressure upon Beijing to loosen its monetary policy.
US Midterm Elections Bolster US Dollar
Also weighing upon the Australian Dollar is the buoyant strength of the US Dollar. The US currency was strengthened by news that the Republican Party won the Midterm elections and took control of the Senate. The ‘Greenback’ rose as the result raised hopes for an end to the political deadlock in Washington. The Republican victory comes on the back of increasing dissatisfaction with President Barrack Obama’s leadership.
Australian Dollar Exchange Rate Continues to Tumble Against GBP and USD
The Australian Dollar continued to weaken against both the Pound and US Dollar on Wednesday as concerns over a slowdown in the global economy weakened demand for riskier commodity based currencies.
Weak PMI data out of the UK added to concerns over slowdown and a further decline in commodity prices negatively influenced the ‘Aussie’.
The AUD/USD exchange rate is forecast to decline further later in the session as economists expect the latest US ADP Employment Change data to show that the US jobs market remained strong in October. Also due is the latest Markit Services data and ISM Non-Manufacturing PMI.
Australian Dollar to US Dollar Exchange Rout Continues
The Australian Dollar to US Dollar exchange rates decline accelerated following the release of better than forecast jobs data out of the USA. The AUD/USD exchange rate has declined by 2%. The report compiled by payroll processor ADP showed that the US private sector created 230,000 jobs last month, beating the preceding month’s figure of 220,000.
Falling commodity prices and fears over a slowdown in China and the Eurozone were continuing to weigh upon demand for the riskier commodity and emerging market currencies.
Further strong gains for the US Dollar could be restrained after the ISM Non-Manufacturing report showed that the USA’s service sector experienced a slowdown in October.
The ISM services index fell from 58.6 in September to 57.1, lower than the expected 58 and falling to its lowest level since June. However, the employment index rose to 59.6, the highest since August 2005, from 58.5.
Australian Dollar to US Dollar Exchange Rate Regains Some Ground
The Australian Dollar recovered from a 4-year low on Thursday as the US Dollar softened against most of its major peers as investors embarked on a bout of profit taking. Against the Pound the Australian Dollar remains firmer as market attention focuses on the outcome of the Bank of England’s latest policy meeting. Economists are forecasting that the recent run of soft domestic data out of the UK will cause policy makers to strengthen their resolve to keep interest rates at the record low level of 0.5%.
Australian Dollar Exchange Rate Recovers Ground Against Pound and US Dollar
The Australian Dollar regained ground against the US Dollar and Pound Sterling exchange rates on Friday after the Reserve Bank of Australia said that it will stick to its accommodating monetary policy as lower interest rates are being supported from the declined value of the ‘Aussie’. The RBA repeated its guidance that the ‘most prudent course is likely to be a period of stability in interest rates.’ Economists widely ignored data published ahead of the statement, AiGroup’s construction index fell 5.7 points to 53.4., still in the expansion zone, but was weaker than expected.
The US Dollar is forecast to strengthen later in Friday’s session if the latest US non-farm payrolls and unemployment data comes in strongly as forecast.
Australian Dollar (AUD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Australian Dollar,
,US Dollar,0.8591 ,
Australian Dollar,,Pound Sterling,0.5428 ,
Australian Dollar,,Euro,0.6930 ,
Australian Dollar,,New Zealand Dollar,1.1170 ,
US Dollar,, Australian Dollar ,1.1638 ,
Pound Sterling,, Australian Dollar ,1.8423 ,
Euro,, Australian Dollar ,1.4429 ,
New Zealand Dollar,, Australian Dollar ,0.8952 ,
[/table]
