Pound Australian Dollar (GBP/AUD) Exchange Rate Fails to Benefit from UK Services PMI Boost
A modest uptick in the UK services PMI was not enough to keep the Pound to Australian Dollar (GBP/AUD) exchange rate from extending its downtrend further.
While the PMI strengthened from 51.7 to 52.8 in April this still fell notably short of forecast, indicating that growth in the sector is more sluggish than investors would like.
The disappointing nature of the PMI gives the Bank of England (BoE) further incentive to leave interest rates on hold at the May policy meeting.
As Chris Williamson, Chief Business Economist at IHS Markit, commented:
‘The surveys have indicated that sales, investment and hiring are being hit by uncertainty about the economic outlook as well as sluggish domestic demand, notably among consumers.
‘The disappointing services data will add to expectations that the MPC will take its finger firmly off the rate hike trigger. Any further slowing will also raise questions as to whether the November rate hike may have been ill-timed.’
Unexpectedly Wide Australian Trade Surplus Weighs Down GBP/AUD Exchange Rate
The Pound to Australian Dollar (GBP/AUD) exchange rate came under additional pressure on the back of March’s Australian trade data.
An unexpectedly sharp widening of the Australian trade surplus encouraged investors to pile into the Australian Dollar (AUD) on Thursday morning.
While global trade tensions and the threat of a US-China trade war remain this positive showing was still enough to give AUD exchange rates a solid boost.
A solid rebound in March’s building approvals figures added to the bullish mood of the Australian Dollar, with markets inclined to take a more optimistic view of the domestic outlook.
However, if Friday’s US labour market data proves bullish this could see the antipodean currency return to a softer footing once again.
Similarly, if trade talks between the US and China break down AUD exchange rates are likely to falter once again.
Pound Australian Dollar (GBP/AUD) Exchange Rate Weakness Forecast on Dovish BoE
With the BoE looking set to leave interest rates on hold next week the Pound to Australian Dollar (GBP/AUD) exchange rate may struggle to find any particular rallying point.
If policymakers opt to take a more cautious tone on the subject of future monetary policy the appeal of the Pound could weaken further.
On the other hand, GBP exchange rates may find support if the Monetary Policy Committee (MPC) continues to express optimism in the domestic outlook.
Any signs that the BoE is likely to maintain a policy tightening bias in the months ahead should offer support to the Pound.
The latest BoE quarterly inflation report will also be in focus, with more positive inflation forecasts likely to keep the odds of a 2018 interest rate hike alive.
If the report points towards price pressures continuing to ease over the coming months, though, this may add to the bearishness of the Pound to Australian Dollar (GBP/AUD) exchange rate.
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