January 5, 2015 - Written by Tim Boyer
STORY LINK Pound to Australian Dollar: GBP/AUD Exchange Rate Falls as UK Construction Figures Print Negatively
The Pound weakened against the Australian Dollar after the UK construction sector slowed in December.
Markit announced its December reading saw a significant slowing, pulling the index down to 57.6 from 59.4. Economists had expected a gentle slip to 59.0, but the further-than-forecast fall was enough to spark a drop in the Pound. Markit senior economist Tim Moore stated: ‘UK construction output growth retreated further in December, but another strong expansion of house building activity ensured that the sector continued to perform impressively overall. Indeed, over the course of 2014, UK construction firms recorded the strongest calendar year of residential building since the survey began in 1997.’
Pound to Australian Dollar Exchange Rate Forecast
Tuesday could be another influential day for the Pound with the release of Markit’s Composite and Services Purchasing Managers Indexes (PMI). The services index is expected to fall a tiny amount from 58.6 to 58.5. Meanwhile, the Composite index is predicted to decline a little further from 57.6 to 57.4. It is worth noting that after Monday’s Construction PMI slip, another tumble could occur—most likely in the composite measure.
However, 2015 could begin to pick up speed with Markit recording better sentiment scores. Moore continued: ‘While new business growth moderated to its lowest for a year-and-a-half in December, UK construction firms are still highly upbeat about their prospects for output growth in 2015. Four times as many construction companies (52%) anticipate an upturn in output over the year ahead as those that expect a reduction (13%).’
Meanwhile, the Australian Dollar has been trending lower as the price of iron ore slows and economists’ forecast a slowdown in the Antipodean nation. Analyst Juliana Roadley stated: ‘We have seen it [the Australian Dollar] falling back; [lower against other majors] we know that there has been lower commodity prices at play, the slump in oil price, and that iron ore coming down. And we are a commodity based economy, so of course when we see the commodity prices coming off, so does our currency.’
Many economists have stated that they expect a decrease in interest rates by the Reserve Bank of Australia (RBA) as a result of a slowing economy. Any talk by the central bank in the coming months could cause massive Australian Dollar swings. In addition, Monday saw the AiG Performance of Manufacturing Index fall from 50.1 to 46.9—quite clearly in contraction territory. The slowdown in sectors such as manufacturing can cause fears that the economic recovery is slowing.
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