Slowing Australian GDP Strikes Blow to ‘Aussie’ (AUD) Today as Effects of Chinese Slowdown Continue to be Felt
This morning saw the Australian second quarter GDP fall short of expectations, slowing significantly further than forecast to clock in at a growth of 2% rather than 2.2%. However, the impact of this data already seems to be waning as traders hedge their bets as to another disappointing PMI from the UK later in the day. At present the GBP/AUD exchange rate is on a downtrend at 2.1730 after its earlier peak.
Earlier…
As the Reserve Bank of Australia (RBA) decides to maintain interest rates at their current level the ‘Aussie’ (AUD) fails to particularly benefit, even as the UK posts an unimpressive Manufacturing PMI.
GBP/AUD Exchange Rate Sank from Six-Year High on Improving Commodity Market and Fed Hike Relief
After softening significantly at the start of last week, with the GBP/AUD exchange rate striking a fresh six-year high at 2.2081, the ‘Aussie’ (AUD) regained much of its lost ground over the following days as the effects of Black Monday began to diminish. With the prices of commodities bouncing back from multi-year lows ahead of the weekend both copper and zinc saw their highest single-day rises in two years, good news for Australian exports.
In the wake of the global stock rout a number of prominent Federal Open Market Committee (FOMC) board members began to make rather dovish comments with regards to the possibility of a September interest rate take-off for the Fed. Given the degree to which the strengthening ‘Greenback’ (USD) and the prospect of imminent US monetary tightening had been weighing on the ‘Aussie’, this turn in sentiment helped shore up the antipodean currency somewhat to prevent the GBP/AUD pairing from returning to its previously bullish form.
Disappointment Today on UK Manufacturing PMI Shortfall Weighs on Pound (GBP), ‘Aussie’ (AUD) Conversion Rate Unable to Capitalise
This morning, unsurprisingly, saw the Reserve Bank of Australia (RBA) opting to hold interest rates at their current record-low level of 2%. A relief to those who might have been expecting a move towards loosening as a result of Chinese turbulence, the move prompted the GBP/AUD exchange rate to drop back to 2.1554 although it wasn’t long before the pairing was on an uptrend once more. In spite of strong domestic Manufacturing PMI and Building Permits data, the Australian Dollar was inevitably held back by another round of worse than anticipated figures from China today.
Bank of England (BoE) Governor Mark Carney failed to particularly convince pundits over the weekend with an optimistic outlook on the possibility of the Monetary Policy Committee (MPC) electing to increase interest rates in early 2016. Any hopes for the appearance of supportive data were dashed this morning as the UK Manufacturing PMI for August demonstrated notable contraction in the sector to undercut the strength of Sterling (GBP). Clocking in at 51.5 instead of the anticipated minor increase to 52, this figure lends further doubts to the robustness of the domestic economy as the FTSE 100 returned to the red.
GBP/AUD Exchange Rate Forecast: Upcoming PMIs Stand to Drive Pairing Movement
It seems likely that this will be another highly active week for the GBP/AUD pairing, with various data due for release from both the UK and Australia in coming days. The Pound will be looking for a strong performance on the UK’s Services and Construction PMIs, with a particularly positive figure for the former very much capable of overshadowing the dismal state of the manufacturing sector.
Of greatest impact to the South Pacific currency should be the Australian second-quarter GDP, which is forecast to contract slightly on the previous month. Any shortfall, which could be possible after the recent commodity turmoil, will only damage the strength of the ‘Aussie’ further. However, similarly good outcomes on the domestic Services PMI and Retail Sales figures may prove sufficient stimulus to drive the GBP/AUD pairing down.
Current GBP, AUD Exchange Rates
At time of writing the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate moving positively at 2.1700, while the Australian Dollar to Pound Sterling (AUD/GBP) pairing is in a downtrend at 0.4607.
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