April 3, 2018 - Written by John Cameron
STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Confounds Expectations, Falling Despite Cautious RBA Minutes
UK Manufacturing Beats Forecasts but Ultimately Disappoints in 2018 – GBP Exchange Rates Fall
The Pound Australian Dollar (GBP/AUD) exchange rate tumbled on Tuesday, failing to capitalise on an above-forecast UK manufacturing purchasing managers’ index (PMI) reading and falling as the ‘Aussie’ Dollar benefitted from a weaker US Dollar (USD).
According to IHS Markit, Britain’s manufacturing sector maintained its reasonable pace of growth in March, with their closely watched survey showing higher output growth as well as input and output cost inflation.
Nonetheless this positivity was negated somewhat by the slowing rate of growth in new orders during this period, with the ‘beast from the east’ slightly hampering growth.
This resulted in a print of 55.1 in March, up very slightly from February’s score of 55 but also beating economist expectations of a fall to 54.7.
Rob Dobson, Director at IHS Markit asserted that weaker orders represented a ‘softer patch’ for manufacturing in the UK, stating:
‘Manufacturers are still reporting solid inflows of new work from domestic and overseas markets. Business optimism is holding steady at an elevated level, with over 54% of companies expecting output to expand over the coming 12 months’.
RBA Leaves Interest Rates Unchanged, AUD Exchange Rates Oddly Unperturbed
Advertisement
The Reserve Bank of Australia (RBA) opted to leave their baseline interest rate unchanged at the April monetary policy meeting, with bank Governor Philip Lowe now officially the least active RBA Chief in history.
This decision marked the 18th consecutive meeting that rates have been kept on hold, with the central bank’s accompanying statement asserting that ‘low levels of interest rates are continuing to support the Australian economy’.
The bank chief continued:
‘Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual’.
This decision, whilst widely expected, was notable in that the minutes illustrated concerns regarding the state of global trade relations, particularly with the US and China still at loggerheads regarding China’s substantial surplus, and creative use of US intellectual property.
Oddly enough, this caution did not limit the Australia Dollar (AUD), with the ‘Aussie’ finding a massive amount of support simply because of the US Dollar’s current weakness.
Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: UK Services in the Spotlight
Sterling could come under increased pressure against the Australian Dollar this week, depending on the performance of the upcoming UK services PMI.
Services, unlike the UK’s manufacturing sector, make up 80% of the UK’s GDP, making this reading a more robust indicator of the performance of the UK’s economy.
Markets currently expect a drop, with the recent storms and severe weather liable to have put a small dent in the March survey.
If this does indeed occur, then Sterling’s fall against the ‘Aussie’ Dollar could be extended.
If the US Dollar makes a recovery later into the week, however, then the pendulum could swing out of AUD’s favour once more, returning demand to the Pound.
Like this piece? Please share with your friends and colleagues:
International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.
TAGS: Pound Australian Dollar Forecasts