Tuesday afternoon has seen the Pound (GBP) lose ground to the Australian Dollar (AUD), falling by -0.3% in the GBP/AUD pairing.
This exchange rate decline is mainly down to a weak US Dollar (USD) raising Australian Dollar demand; the latest UK news has been fairly supportive.
This was June’s construction PMI reading, which showed a surprise increase in activity with a shift from 52.5 points to 53.1.
The news had a broadly positive reception, but not all economists saw this as a sign of further growth ahead.
Cautioning that the sector is still growing slowly and that major projects could be propping up sentiment, Lloyds Bank’s Max Jones said:
‘The [construction] sector is hardly motoring, with some large contractors blaming Brexit uncertainty for the delay or cancellation of projects.
‘The London market also looks significantly exposed to any reduction in EU labour.
‘Nevertheless, the announcement of approval for a new runway at Heathrow has boosted sentiment in the sector, if not yet order books and revenue.
‘But with Heathrow, Hinkley Point and HS2 all now given the green light, the focus shifts to the next mega-project that will offer firms comfort and visibility over their long-term pipelines.’
(Last updated 3rd July, 2018)
Rising Services Sector Reading could Push GBP/AUD Exchange Rate Higher
The Pound (GBP) has fallen by -0.4% against the Australian Dollar (AUD) today, trading at an exchange rate of AU$1.7848.
This decline comes ahead of two UK PMI data releases, one of which could cause significant GBP/AUD exchange rate gains.
Taking these in order, today’s more immediate construction PMI could lower confidence among Pound traders if it shows a forecast-matching slowdown.
Beyond this, however, there could be major GBP/AUD gains ahead when the services sector PMI comes out on Wednesday morning.
This economic activity measure is extremely important for UK economic growth, as it covers areas of the economy like retail sales, tourism and financial services.
The services reading is currently predicted to show no change at 54 points in June, but a surprise rise could still boost Pound Sterling.
Higher services sector activity would be a boon for UK economic growth; the reading dipped in March 2018 but has steadily risen since then.
Will Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Rise Further on UK Output Data?
Looking beyond the upcoming PMI data releases, the Pound to Australian Dollar exchange rate (GBP/AUD) could next be affected by output data.
Coming out on the morning of 10th July, May’s industrial, manufacturing and construction output figures are all expected to print positively.
These results might raise confidence in Pound Sterling and inspire greater trading of the UK currency at the start of the week, leading to a GBP/AUD exchange rate rise.
Australian Dollar to Pound (AUD/GBP) Exchange Rate Predicted to Rise on Trade Surplus Growth
On the other side of the currency pairing, the Australian Dollar (AUD) has a chance to extend its current lead against the Pound (GBP) early on Wednesday.
The morning’s main economic data will consist of a trade balance reading for May, which is tipped to show an expansion of the existing trade surplus.
A forecast-matching rise from Au$0.977bn to AU$1.2bn might be enough to push the Australian Dollar higher on Wednesday morning, ahead of the UK services data.
Risk of Late-Week AUD/GBP Exchange Rate Losses on US Payrolls Data
This week may end on a sour note for Australian Dollar (AUD) traders, at least in relation to trading against the Pound (GBP).
Friday afternoon will bring high-impact US jobs market data, specifically consisting of an unemployment rate reading and a measurement of new jobs added.
This latter figure is the change in non-farm payrolls reading for June, which is forecast to show 190k jobs added to the US economy.
The payrolls figure often has a strong effect on the US Dollar and is known to be volatile; Friday’s reading could miss or beat forecasts by a large margin.
If the payrolls reading rises sharply above the expected reading, then the US Dollar could rally and weaken the Australian Dollar.
More jobs being added in June is to be expected, as it marks the start of summer when a host of companies are looking to hire seasonal workers.
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