GBP/AUD Exchange Rate Falls on Healthy Australian Budget
The Pound Australian Dollar (GBP/AUD) fell by -0.4% today and is currently trading around AU$1.7930 on the interbank market.
The Australian Dollar (AUD) rose against the Pound (GBP) this morning following the publication of the Australian trade balance figures for May, which rose above forecast from 4,820bn to 5,745bn.
This exceeded market expectations, leaping up by an impressive 19% against April’s healthy figures.
Kristina Clifton, a Senior Economist at Commonwealth Bank (CBA), commented:
‘With the budget in good shape but the economy slowing, there is a strong case for looser fiscal policy, including more public sector infrastructure spending.’
Australian building permits figures for May also exceeded consensus and rose from -3.4% to 0.7%.
Yesterday, meanwhile, saw a speech Bank of England (BoE) Governor Mark Carney in which he rapidly raised markets expectations of an interest rate cut in the coming months.
Mr Carney said that global trade headwinds had put pressure on the UK economy, adding that ‘rationales for action are broadening’ – a comment that was interpreted by market analysts as a hint to further cuts from the central bank.
As a result, the Pound began today down against many of its competitors.
GBP/AUD Exchange Rate Decreases as UK Services PMI Nears Contraction
The Pound, meanwhile, fell following the printing of the UK Markit Services PMI figures for June, which fell below consensus and edged nearer contraction territory, falling from 51.0 to 50.2.
Chris Williamson, a Chief Business Economist at IHS Markit, caused further alarm over a possible BoE rate cut, saying:
‘The near-stagnation of the services sector in June is one of the worst performances seen over the past decade and comes on the heels of steep declines in both manufacturing and construction… For policymakers to not loosen policy with the all sector PMI at its current level would be unprecedented in the survey’s two-decade history.’
Brexit and the Tory leadership race remains in focus for Sterling traders.
Increasing political tensions in Parliament are causing some concern, with Chancellor of the Exchequer Philip Hammond increasing his stance against a no-deal Brexit.
Both leadership candidates, Boris Johnson and Foreign Secretary Jeremy Hunt, however continue to insist that a no-deal remain in place as a possibility, saying that it is crucial as a negotiating chip.
AUD/GBP Exchange Rate Edges Higher as US-China Trade Optimism Improves
The US-China trade ‘truce’ has also provided some uplift for the risk-averse ‘Aussie’ today.
Craig James, an Economist at the investment bank Commonwealth Securities (Commsec), commented:
‘Aussies could be excused for thinking that there are no trade frictions in the global economy at present because, from our standpoint, conditions have never been better.’
These further bolstered optimism in the economy, providing some much-needed uplift for the AUD/GBP exchange rate.
GBP/AUD Forecast: ‘Aussie’ Could Rise on Improved Retail Figures for June
Australian Dollar investors will be looking ahead to tomorrow’s printing of the retail sales figures for May, which are expected to improve.
These will be followed by the Australian AIG performance of construction index figures for June.
Any signs of improvement could further uplift the ‘Aussie’.
The Pound Australian Dollar (GBP/AUD) exchange rate will, however, remain sensitive to political developments surrounding US-China trade discussions and the ongoing Tory leadership race.