GBP/AUD Falls as UK Data Disappointed and Aussie Ecostats Shine

June 2, 2015 - Written by Frank Davies

STORY LINK GBP/AUD Falls as UK Data Disappointed and Aussie Ecostats Shine

UK Manufacturing PMI Pushes GBP Lower

After disappointing UK data emerged, the Pound registered losses against the ‘Aussie’ on Monday. The day began well for the Australian Dollar with the latest domestic Performance of Manufacturing Index coming in at 52.3 in May, after April’s 48.0. Any ecostat that resides above the 50.0 benchmark denotes growth whereas below signals contraction. The data was hailed as a massive improvement considering the sector hasn’t registered expansion for six months.

The index read: ‘Activity across the manufacturing industry expanded in May, boosted by a lift in manufacturing exports which have benefited from the lower Australian Dollar. This followed five months of contraction in manufacturing activity... Five of the seven activity sub-indexes in the Australian PMI were above 50 points this month. Manufacturing exports expanded again in May after a brief contraction in April, mainly due to a resurgence in food and beverages this month, with the machinery and equipment sub-sector recording a fifth consecutive month of expansion in exports, despite an ongoing, pronounced contraction in overall activity levels in this sector.’

AUD Supported by Positive 'Aussie'/Chinese Data

The upbeat Australian data was accompanied by the release of favourable Chinese manufacturing data; as China is Australia’s largest trading partner, any developments across the water can have a positive impact on the ‘Aussie’ exchange rate. The Chinese Manufacturing PMI rose from 50.1 to 50.2 in May, a little lower than the 50.3 estimate, but still an improvement.

Meanwhile, the Pound exchange rate suffered losses on Monday when the UK’s manufacturing sector recorded less progress than economists had expected. The latest UK Manufacturing PMI came in at 52.0 in May after the previous’ months 51.8. Economists had expected a more favourable 52.5.

Industry expert David Noble commented: ‘Though hopes of a stronger pace of recovery were dashed by manufacturing this month, the sector resisted repeating April’s sharp slowdown and instead delivered a further modest easing in the growth rate of activity... Overall, the sectors enduring driver continued to be domestic demand, as exports failed to ignite any new highs in recovery. This uninspiring level of activity is likely to cast a shadow in the coming months and encourage expectations of a flat lining future.’

The ecostat and pessimistic comments caused Pound softening at a time where investors are looking toward the data for the possibility of higher borrowing costs in the UK. Tuesday may give the UK currency the opportunity to climb with the release of Net Consumer Credit, Net Lending Secured on Dwellings, Mortgage Approvals and construction sector data.

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TAGS: Australian Dollar Forecasts