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Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Slides Despite Positive British Data

January 2, 2019 - Written by John Cameron

The Pound Australian Dollar (GBP/AUD) exchange rate slumped over the course of the morning, with the pairing sitting at AU$1.8044 by the afternoon, down 0.3% on the day’s opening levels.

This morning saw the publication of a better-than-expected December Markit manufacturing PMI figure for the UK, which increased from 53.6 to 54.2 despite a predicted fall. Despite this the report did little to bolster the Pound against the Australian Dollar.

Rob Dobson, IHS Markit director noted:

‘Any positive impact on the PMI is likely to be short-lived, however, as any gains in the near-term are reversed later in 2019 when safety stocks are eroded or become obsolete.’

GBP/AUD Exchange Rate Fails to Sustain Last Week’s Gains

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate’s recent losses have undone some of last week’s gains.

The Pound edged higher last Friday as the release of UK mortgage data showed the first annual rise in over a year, with British banks approving 39,403 mortgages in November, which aided Sterling in clawing back gains previously made by the ‘Aussie’.

Although this figure initially appearing positive, chief economist at EY ITEM Club stated:

‘The housing market is struggling for momentum in the face of still relatively limited consumer purchasing power, fragile consumer confidence and, possibly, wariness over higher interest rates.’

It is expected that house prices will be marginally higher or flat in the coming year due to the weaknesses in London and the surrounding areas are weighing on the price growth in other parts of the UK.

GBP/AUD Exchange Rate Volatile as Cooling US-China Trade Tensions Bolster the Australian Dollar

The GBP/AUD exchange rate has been volatile over the course of the New Year, with the decrease in US-China tensions a likely factor in the ‘Aussie’ pushing back against Sterling.

A phone call between the two leaders, Xi Jinping and Donald Trump, was described by the US President as a ‘long and very good call’.

Chinese President Xi Jinping stated:

‘I attach great importance to the development of China-US relations and am willing to work with President Trump to summarise the experience of the development of China-US relations and implement the consensus we have reached in a joint effort to advance China-US relations featuring coordination, cooperation and stability so as to better benefit the two peoples as well as the people of the rest of the world.’

Outlook: GBP/AUD Exchange Rate to Continue to Slip on Poor UK Construction PMI?

Thursday will see the release of December’s UK construction PMI, which is forecast to fall from 53.4 to 52.9. If this forecast is correct or if the result is worse than expected, it seems likely AUD will be able to make further gains on the UK currency.

The TD securities inflation data released by the University of Melbourne (which estimates inflation for the Australian economy) is set to be released for December, and if there is an increase from the previous 0% the Australian Dollar could continue to make gains against GBP.

Friday will see the release of the UK Markit services PMI for December, which is predicted to increase from 50.4 to 50.7. As the services sector accounts for over 70% of total UK growth, a positive result here might give the Pound a little lift before the weekend.
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