RBA Comments Prompt Hawkishness for Australian Dollar (AUD) Today
Policymakers at the Reserve Bank of Australia (RBA) opted to hold interest rates unchanged overnight, with the ‘Aussie’ (AUD) bolstered by Governor Glenn Stevens indicating that the economy has ‘firmed’. While Stevens did not rule out the possibility of fresh monetary loosening over the coming months, his comments were sufficiently hawkish to push the GBP/AUD exchange rate into a slump around 2.1439.
Earlier…
After unimpressive Australian manufacturing data the GBP/AUD exchange rate has been on strong form today, buoyed by the release of a stronger-than-expected UK Manufacturing PMI.
Slowed Australian Manufacturing and Chinese Weakness set ‘Aussie’ (AUD) on Downtrend
In spite of a week of weak UK data the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate remained on a general uptrend ahead of the weekend. Wednesday’s unexpectedly hawkish statement from the Federal Open Market Committee (FOMC) saw the odds of a December interest rate rise markedly increase, leading to an atmosphere of risk aversion that dominated market sentiment over the following days. In spite of the third quarter US GDP and latest Personal Consumption Expenditure Core figure printing at disappointing levels, seeming to indicate that the US economy was not ready for a hike, traders remained cautious to keep the ‘Aussie’ (AUD) soft.
Sunday was not a particularly strong day for the antipodean currency either, as the Australian Manufacturing PMI showed a pointed slump on the month. Falling to 50.2 the index showed that the sector only narrowly remained in a state of expansion in October, a result that offered little encouragement with regards to the continued health of the domestic economy. As Chinese manufacturing also demonstrated weakness, investors have little incentive to buy back into the Australian Dollar.
Pound Currency News: UK Manufacturing PMI Significantly Betters Expectations Today
The Pound (GBP), meanwhile, was supported by an unexpectedly positive UK Manufacturing PMI result. Defying forecasts for a slight decline the index soared from 51.8 to 55.5, suggesting that the domestic manufacturing sector expanded significantly in October. While this naturally saw the GBP/AUD exchange rate surge, it was not long before the pairing began to cede back some ground, spurred by cautions about the data. Economists were inclined to consider this surprising increase to be something of an outlier, throwing doubts on the likelihood that the nation’s manufacturing output would sustain such a bullish trend in the rest of the quarter.
GBP/AUD Exchange Rate Forecast: Volatility Likely with Upcoming RBA Rate Decision
Overnight the latest Reserve Bank of Australia (RBA) Rate Decision seems set to provoke further volatility for the ‘Aussie’, especially if Governor Glenn Stevens strikes a particularly dovish tone in comments following the meeting. However, should Stevens prove more reticent to the prospect of an interest rate cut in the immediate future, and tomorrow evening’s domestic Services PMI remain positive, the antipodean currency could be in line for a rally.
Also releasing tomorrow will be the month’s UK Construction PMI, which is forecast to show a decline on the last month’s strong sector expansion. A slowing in the domestic construction industry is not likely to hold down the Pound for especially long, though, as it is one of the smaller contributors to the national GDP.
Current GBP, AUD Exchange Rates
At time of writing, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trending in the region of 2.1641, while the Australian Dollar to Pound Sterling (AUD/GBP) pairing slumped around 0.4615.
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