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GBP/AUD Exchange Rate Accelerates on Better-than-Expected UK Services PMI


GBP/AUD Exchange Rate Lifted by Upwardly Revised Services PMI

The Pound Australian Dollar (GBP/AUD) exchange rate opens this week’s session on strong footing as investors welcome the UK’s latest services PMI.

At the time of writing the GBP/AUD exchange rate is currently trading at around AU$1.8938, having risen roughly 0.6% from the day’s opening levels.

Pound (GBP) Lifted by Services PMI, But Will the UK Stagnate in Q4?

The Pound (GBP) is rallying this morning after the UK’s final PMI reading for December saw the growth in the all-important service sector unexpectedly revised higher.

According to data published by IHS Markit, the UK’s final service PMI came in at 50.0 in December, up from 49.3 in November and being revised up from a preliminary reading of 49.0.

The upwards revision came courtesy of increasingly optimism in the second half of December following the UK general election.

Tim Moore, Economics Associate Director at IHS Markit, comments:

‘The latest UK service sector figures are an improvement on those seen in November and strike a slightly more positive tone than the earlier ‘flash’ PMI for December. The final IHS Markit/CIPS UK Services data includes survey responses from after the election, unlike the earlier flash estimate.’

However it’s worth noting that even following the revision, that the UK’s service sector failed to expand for the fourth consecutive month in December, something which will fuel speculation that UK GDP may have stagnated in the final quarter of 2019.

Geopolitical Tensions Set to Limit Demand for the Australian Dollar (AUD)

The Australian Dollar (AUD) opens this week on the back foot as a risk-off mood prevails in markets in light of rising tensions in the Middle East.

This comes in the wake of the US air strike against top Iranian general, Qassem Suleimani last week, which has stoked fears of a conflict in the region.

Iran has vowed to retaliate for the killing, with Iran’s Supreme Leader Ayatollah Khamenei, promising ‘severe revenge’ for those responsible.

In turn US President Donald Trump has threated to hit 52 targets ‘very hard and very fast’ if Iran should retaliate against the US or its allies.

Fears of conflict in the Middle East has sent investors scrambling for safe-haven assets like the Japanese Yen (JPY) and gold, with the perceived risk of the Australian Dollar, likely to result in a bearish bias dragging on AUD exchange rates for the immediate future.  

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