Pound to Australian Dollar Exchange Rate Gains Minimal as UK Services PMI Disappoints
Despite spending most of the week above the week’s opening levels, the Pound to Australian Dollar (GBP/AUD) exchange rate is unlikely to sustain significant gains this week as disappointing UK data has weighed on Sterling (GBP) strength.
After opening this week at the level of 1.8244, GBP/AUD has attempted gains and even briefly touched on a high of 1.8363 on Wednesday. The pair has continued to fluctuate though and trended closer to 1.8260 on Thursday morning.
Last week, GBP/AUD touched on its best levels since the 2016 Brexit vote. The pair may be unlikely to return to near those levels if the Australian Dollar (AUD) strengthens however.
Multiple factors weighed on the Pound to Australian Dollar (GBP/AUD) exchange rate, but perhaps the most notable news weighing on the Pound was Britain’s March PMIs, many of which fell short of forecasts.
Britain’s services PMI unexpectedly slowed from 54.5 to 51.7 in March, despite being forecast to only slip to 54.
This news, as well as higher demand for risk-correlated currencies on Thursday, could prevent the Pound to Australian Dollar from sustaining any major gains this week.
Pound (GBP) Exchange Rates Slip as Bad Weather Hits UK Services Sector
As Markit’s March UK services PMI fell short of expectations on Thursday, investors became concerned that Britain’s biggest sector was performing slower than hoped.
Anecdotal evidence suggested that the unexpectedly bad weather for this time of year, which saw Britain under snowy and icy conditions, played a notable part in keeping consumers at home and slowing services activity.
It followed a disappointing UK construction PMI on Wednesday, which saw the sector surprisingly contract for the first time in six months.
As a result of the disappointing services and composite prints, the overall UK composite PMI failed to reach the forecast 53.9 and instead slumped to just 52.1.
Analysts are uncertain whether a slowdown trend could be part of the fall in services too. According to Duncan Brock from the Chartered Institute of Procurement & Supply (CIPS);
‘Not much to be enthused about all in all, but the question remains whether this will be a sign of a more entrenched slowdown or whether the unpreparedness for unseasonal weather conditions was the root cause.
As further rises in cost burdens for the sector seem inevitable, and the Brexit shadow remains, there will have to be an injection of confidence and stronger economic performance next month to conclude March was just a glitch.’
Australian Dollar (AUD) Supported by Risk-Sentiment and Australian Data
While the Australian Dollar has not been able to advance against the Pound this week, it has still held against Pound gains thanks to supportive news, both domestic and global.
This week’s Australian ecostats have been largely optimistic, aside from February’s building permits results.
Australian retail sales came in twice as strong as expected in February, at 0.6% month-on-month.
Thursday’s data continued the trend of sturdy data, with Australia’s March services PMI from AiG climbing from 54.0 to 56.9.
Australia’s February trade balance result was solid too. The surplus printed at A$0.825b rather than the forecast A$0.7b.
As well as domestic data, the risky trade-correlated Australian Dollar was supported by market hopes that the US and China would both work to avoid a ‘trade war’ from breaking out.
Pound to Australian Dollar (GBP/AUD) Forecast: Trade Concerns Remain in Focus
The Australian Dollar may have seen even stronger performance this week if uncertainty surrounding the US stance on global trade wasn’t so prevalent.
However, in the end the trade uncertainty limited the strength of an otherwise stronger Australian Dollar and GBP/AUD looks to end the week slightly above the week’s opening levels as a result.
Friday’s data is unlikely to have a notable impact on the Pound to Australian Dollar (GBP/AUD) exchange rate. Australian TD-MI inflation gauge data and vehicle sales stats will be published.
Bank of England (BoE) Governor Mark Carney will hold a speech on Friday too. Sterling could be influenced if monetary policy comes up at all during the speech.
Next week’s UK data will be less influential, besides trade and production stats due on Wednesday.
Australia’s data is likely to have a bigger impact on GBP/AUD, with business and consumer confidence survey stats due throughout the week.
As well as Australian confidence data, the Australian Dollar is likely to be driven by any developments on trade tariffs and tensions between the US and China.
Further signs that the US and China will negotiate trade issues rather than ramp up tariffs would likely boost demand for risky trade-correlated currencies like the Australian Dollar.
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