GBP/AUD Exchange Rate Steady despite Above-Forecast UK Construction Sector Growth

Modified: Wednesday, 2 May 2018 13:05 BST - Written by Toni Johnson

STORY LINK GBP/AUD Exchange Rate Steady despite Above-Forecast UK Construction Sector Growth

On 1st May, the Pound to Australian Dollar exchange rate opened trading in the region of 1.8284 but closed down lower around 1.8188.

This deterioration was caused by a disappointing manufacturing PMI reading for April, which showed a greater than expected slowdown in activity.

The result was especially worrying for Pound traders as there were no weather-related events during April that could be used to justify falling PMI figures.

Australian economic news was similarly disappointing, with a decline in April’s manufacturing activity coming alongside cautious remarks from Reserve Bank of Australia (RBA) officials.

Emphasising the ‘slow and steady’ outlook of the RBA, Governor Philip Lowe said;

‘The progress we are making is only gradual: our central scenario is for a gradual pick-up in wages growth, a gradual lift in inflation, and a gradual reduction in the unemployment rate’.

Rising UK Construction Sector PMI Fails to Boost GBP/AUD Exchange Rate

In a change from Tuesday’s events, the Pound to Australian Dollar (GBP/AUD) exchange rate has made smaller losses today after news of UK construction sector growth in April.

The construction PMI for the previous month showed a rise from 47 points to 52.5, a better result than the anticipated 50.5 point reading.

Economists had a mixed response to the data, with some praising this as a construction sector recovery and others warning of continued underlying weakness.

Providing a balanced outlook, Duncan Brock, Group Director of the Chartered Institute of Procurement and Supply, stated that;

‘April’s data provides some relief after last month’s weather disruption, especially for the housing sector after a lacklustre few months.

‘However, economic uncertainty and Brexit-related indecision continue to lurk beneath the surface as obstacles to the construction sector’s stability.

‘New orders remain too few and far between, with just a small improvement in the level of extra work reported this month’.

Mr Brock concluded by highlighting rising construction sector optimism and predicting a potential course for further expansion;

‘There were some positives reported by construction firms in April as optimism rose to its highest level since May 2017 and an increase in workforces was reported in anticipation of a better second quarter of the year.

‘What the sector needs now is more widespread client confidence and big ticket projects to follow suit.

‘House building at least seems to be moving in the right direction, and by achieving its fastest rate of growth since May 2017 it has gone from a laggard to a construction leader again’.

AUD/GBP Exchange Rate Ticks Higher on Pre-Budget Optimism

Ahead of the Australian Federal Budget announcement on 8th May, the Australian Dollar to Pound exchange rate (AUD/GBP) has seen a minor rise.

It has recently been reported that AU households face increasing pressures on the cost of living, which has made hints of income tax cuts in the budget particularly welcome.

Although cost of living pressures are unwelcome in the AU economy, the fact that the government seems poised to deliver an immediate remedy has raised confidence among AUD traders.

GBP/AUD Forecast: Will Pound to Australian Dollar Exchange Rate Rally on Services Sector PMI?

Fresh off the back of today’s construction sector recovery, the Pound to Australian Dollar (GBP/AUD) exchange rate could rise on 3rd May when April’s services PMI will be announced.

Like the construction PMI reading, this is predicted to show growth during the previous month.

Compared to both construction and manufacturing, the services sector PMI is the most important of the three as the sector contributes the most towards national economic growth.

If the upcoming services sector reading shows an as-expected rise in activity then the Pound (GBP) could rise sharply against the Australian Dollar (AUD).

A GBP/AUD exchange rate rise could also be supported by upcoming Australian economic data, which is tipped to print negatively.

The Australian trade balance reading for March is predicted to show a surplus reduction, which may unsettle AUD traders and lead to the Australian Dollar declining in value.

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