Aus Dollar Forecast - GBP to AUD Tumbles as Sterling Exchange Rates Depreciate

Modified: Sunday, 5 October 2014 16:44 BST - Written by Frank Davies

STORY LINK Aus Dollar Forecast - GBP to AUD Tumbles as Sterling Exchange Rates Depreciate

The Pound to Australian Dollar Exchange Rate (GBP/AUD) Tumbles as BoE Remarks Cause Sterling Depreciation

The Pound has been sliding against the Australian Dollar on Friday following remarks from Bank of England (BoE) policymaker Ben Broadbent.

Sterling faltered on Broadbent’s dovish tone which suggested that Britain is ‘not yet ready’ for any increase in interest rates.

The Australian Dollar was little affected on Friday after the release of a weaker than expected AiG Performance of Service Index.

Australian Dollar Precarious on Data

The Australian services sector contracted further in September, falling to 45.5 from 49.4.

The four index point drop shows the services sector is moving further away from expansion as any figure above 50 denotes growth.

AiG Chief Executive Innes Willox stated: ‘The drop in Australian PSI in September calls into question the momentum that had been gathering over the previous couple of months.

The sharp falls in sales and new orders underlines the fragility of the economy in search of sources of growth beyond the minerals and energy sector.’


However, the Australian HIA New Home Sales figure grew by 3.3% in August, bouncing back from July’s -5.7% contraction.

Some economists had hoped that more housing construction would translate into more jobs and increased retail sales.

However, despite the rebound economists are forecasting further losses in the future.

HIA economist Diwa Hopkins stated: ‘Despite the August bounce, we still hold the view that new home sales reached their peak for the cycle back in April this year.

Current levels remain elevated by a historical standard, which is consistent with still healthy levels of new home building throughout 2014/15.’ The increase in home sales was driven by apartment demand, a usually volatile sector.

Pound Rate Pressured Lower by BoE

Meanwhile, the Pound has been on a losing streak as the Bank of England has struck the currency a blow yet again.

Broadbent suggested that the UK economy would be unable to sustain increased borrowing costs in the near future and as a result investors have backed away from the Pound.

Forex expert Kathleen Brooks commented: ‘If the market feels the BoE is getting cold feet about a rate hike, then we could see further Pound weakness.’

Pound strength could also be hindered by poor UK Markit Composite and Services Purchasing Managers Indexes (PMI) released on Friday.

Composite PMI dipped to 57.4 in September from 59.3 while the Services PMI dropped from 60.5 to 58.7.

Although both figures reside above the 50 benchmark which indicates expansion, Sterling will be more volatile for the tumble in both figures.

GBP AUD Exchaneg Rate Forecasts for the Week Ahead

With no further data releases for the UK or Australia this week, any movement in the GBP/AUD currency pairing will be the result of global developments.

Monday will see the release of the Australian AiG Performance of Construction Index while the UK will publish Industrial Production, Manufacturing Production and Gross Domestic Product Estimate figures on Tuesday.

Thursday will prove influential for the GBP to AUD exchange rate as Australian Employment Change and Unemployment Rate figures will be released.

Moreover, the Bank of England’s Rate Decision is likely to cause volatility for Sterling on Thursday.

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