Falling UK PMI Figures could Cause GBP/AUD Exchange Rate Losses
Unfortunately for GBP traders, however, this early appreciation may give way to losses during the week after UK PMI data comes out.
This week’s UK PMI readings will consist of today’s manufacturing PMI, tomorrow’s construction PMI and Wednesday’s services PMI.
All three readings are expected to show a slowdown in activity levels during September, which might unsettle GBP traders and lead to Pound Sterling losses.
Lower PMI readings indicate reduced levels of activity, although any reading above 50 points still means that the sector in question is growing.
While none of the PMIs are expected to fall into the sub-50 point contraction range, the Pound could still be weakened, especially if the services PMI drops.
The services sector is the single largest contributor to UK economic growth, so a slowdown in September could mean reduced GDP growth in the months ahead.
Will No-Deal Brexit Risks Cause GBP/AUD Exchange Rate Losses?
Less concretely, the Pound could also be affected this week by any updates about the ongoing Brexit process.
Talks have been stalled for the past two weeks, in the wake of Prime Minister Theresa May’s plans being rejected at a summit of EU leaders.
Most recently, Brexit Secretary Dominic Raab has warned that if the EU tries to force the UK into a customs union, a ‘no-deal Brexit’ might be unavoidable.
Mr Raab’s statement has limited GBP/AUD exchange rate gains today, but if it looks like the UK is on track to leave the EU with no deal then the Pound could tumble.
In the ideal world, this week will bring news of a breakthrough in Brexit negotiations which could boost the Pound and cause a GBP/AUD exchange rate rise.
October’s deadline for concluding talks has moved forward to November, but if it looks like talks could be further delayed then the GBP/AUD exchange rate could decline.
Australian Dollar Forecast: Will RBA Meeting Bring AUD/GBP Exchange Rate Gains?
On the other side of the currency pairing, the Australian Dollar (AUD) might be able to advance against the Pound (GBP) on tomorrow’s central bank news.
The Reserve Bank of Australia (RBA) will be holding its monthly monetary policy meeting, which includes a vote on interest rates.
RBA policymakers aren’t expected to adjust rates from 1.5%, but could nonetheless support the Australian Dollar with an optimistic economic outlook.
The next RBA interest rate adjustment has been signposted as a hike rather than a cut, but economists are still unsure about when this increase could occur.
For AUD traders, a positive outcome from Wednesday’s meeting would be for policymakers to point to a 2019 interest rate hike.