Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Falls Following RBA Meeting
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped by -0.2% this morning, leaving the pairing trading at around AU$1.9319.
The ‘Aussie’ edged higher this morning on the hopes Australia and New Zealand would soon open their economies to each other after getting the coronavirus pandemic under control.
However, AUD gains were limited after the Reserve Bank of Australia (RBA) left interest rates at a record low.
In its post-meeting statement, the RBA noted that the country’s economic output would fall by -6% this year in a ‘baseline scenario’. Although growth was likely to rebound by 6% in 2021.
Despite this, RBA Governor Philip held out hope of a stronger economic recovery if there is ‘further substantial progress in containing the coronavirus in the near term and there is a faster return to normal economic activity.’
Australian Dollar (AUD) Rises despite Huge Job Losses
Added to this, in a separate sign, data revealed that Aussie consumer sentiment rose for the fifth week in a row. This data from ANZ Banking Group is a good sign for retail spending and offered AUD some support.
Although further data showed that Australia may have lost close to a million jobs between mid-March and mid-April.
Commenting on this, Justin Smirk, Westpac economist noted:
‘This is a clear early indication of the impact the shutdowns are having on the Australian labour market.
‘As such, the payrolls are telling us that we need to get set for a large negative in the April Labour Force Survey.’
Sterling (GBP) Slumps as Service Sector Reaches a ‘Stasis’
This morning, Markit PMI data revealed the UK’s services sector saw a decline in activity, new work, and employment.
Added to this, input costs fell for the first time since the survey began in 1996, while business expectations were only up slightly.
The country’s services PMI plummeted from March’s already disappointing 34.5 to 13.4 in April. While this was slightly higher than the 12.3 flash estimate, it still weighed on GBP.
Commenting on this, Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, noted:
‘The services sector reached a stasis in April as the engine of business was put to sleep and the flow of new customers was cut off amidst public health concerns.
‘The PMI graphs visibly show cataclysmically low levels of domestic and export new orders, along with outstanding business as companies simply shut up shop. Firms also resorted to quick redundancies to avoid bankruptcy or made use of the furlough scheme to suspend operations as job creation halted apart from some online operations or digitally-focused activity.’
Pound Australian Dollar Outlook: Retail Sales and Construction PMI in Focus
Looking ahead, the Australian Dollar (AUD) could edge higher against the Pound (GBP) following the release of Aussie retail sales data.
If retail sales jump higher than forecast, the ‘Aussie’ will make extend Tuesday’s gains.
Meanwhile, further disappointing PMI data will send Sterling lower. If April’s construction plummets further below 50 it will send the Pound Australian Dollar (GBP/AUD) exchange rate lower.