GBP/AUD Exchange Rate Buoyed in Spite of Gloomy PMIs
The Pound to Australian Dollar (GBP/AUD) exchange rate is trending higher today, in spite of the UK’s latest PMI figures showing a worrying drop in private sector growth amid the coronavirus crisis.
At the time of writing the GBP/AUD exchange rate is trading at around €1.9934, up roughly 1% from this morning’s opening rate.
Pound (GBP) Tempered as Dire PMI Figures Highlight Impact of Coronavirus on UK Economy
The Pound (GBP) gains against the Australian Dollar (AUD) have been capped today as the UK’s latest PMI figures paint a gloomy picture of economic activity during the coronavirus crisis.
According to preliminary data published by IHS Markit, the UK’s composite PMI plummeted from 53.0 in February to 37.1 this month, the index’s worst reading in its 22-year history.
A reading below 50 indicates a contraction of growth.
While the UK government has gradually implemented its social distancing measures over the past few weeks in an effort to minimise disruption to the economy, today’s data still makes for dire reading.
Analysts forecast this points to a contraction of GDP of up to 2% in the first quarter, and that the economic hit will only get larger in the second quarter as the government is forced to implement even more draconian measures to contain the coronavirus outbreak.
Chris Williamson, Chief Business Economist at IHS Markit, said:
‘Historical comparisons indicate that the March survey reading is consistent with GDP falling at a quarterly rate of 1.5-2.0%, a decline which is sufficiently large to push the economy into a contraction in the first quarter.
‘However, this decline will likely be the tip of the iceberg and dwarfed by what we will see in the second quarter as further virus containment measures take their toll and the downturn escalates.’
Australian Dollar (AUD) Dented as Australia Extends Restrictions on Social Movements
Meanwhile, the Australian Dollar (AUD) relinquished its initial gains this morning after Australian Prime Minister Scott Morrison announced a new list of restrictions on businesses and social movement
From Wednesday most businesses and public spaces will be forced to close their doors in an effort to limit the spread of the coronavirus, with Australians required to stay at home except for essential outings.
AUD investors were unsurprisingly spooked by the announcement, as they fear the disruption to the economy will see Australia slip into a recession for the first time in 30 years.