Near-Term Pound to Australian Dollar Exchange Rate Outlook: RBA Meeting & UK Services PMI

September 3, 2017 - Written by John Cameron

STORY LINK Near-Term Pound to Australian Dollar Exchange Rate Outlook: RBA Meeting & UK Services PMI

The Pound to Australian Dollar exchange rate is hovering around opening levels on Monday September 4, quoted at 1.62798 (12:00 GMT.

The near-term risk event for GBP/AUD trading is the RBA meeting overnight and Tuesday's UK Services PMI, which is expected to disappoint.

"Looking ahead, GBP/AUD is likely to struggle on Tuesday 5th September as the UK releases its latest Services PMI as economists predict that activity will have slowed in August."

The British pound was marred by volatility last week as Brexit concerns and the latest missile test by North Korea caused the pairing to fluctuate for much of the session.

Pound (GBP) Undermined by Slow Progress of Brexit Talks

The Pound initially skyrocketed against the Australian Dollar later week, however the pairing’s gains proved to be short lived as the closure of UK markets for the bank holiday weekend caused thin trading volumes to hamper Sterling on Monday.

The pairing saw further volatility on Tuesday with the Pound gaining during the Asian session as the Australian dollar slipped, before falling back again as Nationwide reported that UK house prices unexpectedly fell in August.

Meanwhile on Wednesday figures from the Bank of England (BoE) showing an unexpected rise in mortgage approvals in July helping Sterling recover from its weekly low.

However accompanying data showed an unexpected drop in Consumer Credit over the same period, slowing the Pound’s gains as many analysts suggested that this with give the BoE more wriggle room to leave interest rates at record lows.

The GBP AUD roller-coaster continued into Thursday as well as Sterling sentiment sank in the afternoon following the conclusion of the latest round of Brexit talks with the EU, with investors dismayed to learn that negotiations had failed to make much progress.

The key point of contention appeared to be over the UK’s withdrawal agreement, with EU chief negotiator, Michel Barnier reportedly saying that the UK did not feel ‘legally obliged to honour its obligations’ in regards to its ‘divorce bill’ from the EU.

A final attempt to rally against the ‘Aussie’ came at the end of the week as the UK released its latest Manufacturing PMI as it raced up from 55.3 to 56.9 easily outpacing forecasts it would slide to 55.0 and falling just shy of the three-year high struck in April.

Rob Dobson, Director at IHS Markit said, ‘The UK manufacturing sector continued to show signs of solid progress during the third quarter, with rates of expansion in output, new orders and employment all gathering pace in August. The key question is whether this positive start to the second half of the year can be sustained.’

However this proved to be too little to prevent the ‘Aussie’s final push on Friday afternoon, leaving the pairing close to where they began the week’s session.

Australian Dollar (AUD) Rocked by North Korean Tensions

The Australian Dollar has been marred by volatility this week as North Korea fired a ballistic missile over Japan, shocking the international community and rocking currency markets.

The fallout out from the latest test seen markets into a tizzy in the first half of the week as they feared tensions could escalate yet again.

However these fears eventually receded, allowing the Australian Dollar to rally overnight on Thursday following a stronger than expected Manufacturing PMI, with activity reaching its highest levels since 2002.

However the ‘Aussie’ was given a final boost at the end of the week as the US released a disappointing payrolls report, causing investors to flock from the US Dollar (USD) to high-yield currencies.

GBP AUD Exchange Rate Forecast: UK Services Data to Weaken Sterling?

Looking ahead the GBP AUD exchange rate is likely to struggle on Tuesday as the UK releases its latest Services PMI as economists predict that activity will have slowed in August.

Meanwhile the Australian Dollar is also likely to stumble at the start of next week as the Reserve Bank of Australia (RBA) gathers for its latest monetary policy meeting, with analysts overwhelming forecasting that the bank will remain tied to its neutral bias in regards to interest rates.

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