Risk of GBP/AUD Exchange Rate Losses on Slowing UK Economic Activity
The Pound (GBP) has traded tightly against the Australian Dollar (AUD) today, moving at a level of AU$1.7723.
This is still near weekly exchange rate highs, but in the longer term is below last week’s best exchange rate of AU$1.7791.
Unfortunately for GBP traders, the Pound is at risk of making losses over the rest of the week when a trio of high-impact UK PMI data releases come out.
These will measure UK manufacturing, construction and services sector activity and are out over Wednesday, Thursday and Friday, respectively.
All three readings are predicted to show slowing economic activity during July, which might mean that the Pound declines against the Australian Dollar on the news.
The most important of these is Friday’s services sector reading, which is tipped to slow from 55.1 points to 54.7.
Any reading above 50 points indicates growth, so while a slowdown is negative news it wouldn’t be as bad as a slip into the contraction range.
Will Bank of England (BoE) Interest Rate Decision bring GBP-Boosting Rate Hike?
While this week’s UK PMI data could lower GBP trader confidence, there is still a chance for GBP/AUD exchange rate gains at noon on Thursday.
This is when the Bank of England’s (BoE) interest rate decision will be announced – economists are looking for a rate hike from 0.5% to 0.75%.
This isn’t a guaranteed outcome, but if it does occur then the Pound could rise sharply against the Australian Dollar.
It is worth noting that if BoE policymakers raise rates but suggest that no further near-term rate hikes are likely, then GBP/AUD exchange rate gains may be limited.
Risk of Australian Dollar to Pound (AUD/GBP) Exchange Rate Losses on Slower AU Manufacturing
On the other side of the currency pairing, the Australian Dollar (AUD) could fluctuate against the Pound (GBP) this week on manufacturing and trading data releases.
Taking these in order, the AIG manufacturing index for July is out on Wednesday morning and is currently forecast to show reduced sector activity.
A decline from 57.4 points to 56.8 could devalue the Australian Dollar, particularly because the last three readings have all shown slowing activity.
AUD/GBP Exchange Rate Forecast: Will AU Trade Surplus Rise Boost Australian Dollar to Pound Trading?
After Wednesday’s Australian manufacturing data has come out, the AUD/GBP exchange rate could next be affected by Thursday’s trade balance reading for June.
Unlike the negatively-forecast manufacturing reading, Australia’s trade balance is tipped to show a surplus expansion from AU$0.83bn to AU$0.9bn.
A rising trade surplus indicates that Australia’s trading relationships are healthy and that the nation is exporting more than it imports.
Although any AUD/GBP gains could be eclipsed by Thursday’s later BoE rate decision, the Australian Dollar may still be able to rise against the Pound early in the day.
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