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Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Slips as ?Lifeblood? of UK Services Sector ?Leaks Away?

March 5, 2019 - Written by John Cameron

Pound Australian Dollar (GBP/AUD) Exchange Rate Slips as Employment in UK Services Falls

The Pound Australian Dollar (GBP/AUD) exchange rate slipped this afternoon, and the pairing is currently trading at an inter-bank rate of AU$1.8539.

The Pound was weighed down by February’s Markit services PMI, which showed that employment within the sector fell at its fastest pace since November 2011.

The PMI registered 51.3 in February, showing that it had marginally improved from the previous month’s two-and-a-half year low.

Commenting on the data, Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply said:

‘Once again this month, the lifeblood of the sector continued to leak away with Brexit indecision striking another blow to new orders and unemployment in February. Any hoped-for progress next month looks likes it will be equally stifled, as services activity heads for its weakest quarter since late-2012.

‘[…] Consumer and client confidence disappeared from the sector, as the hesitancy to place orders also rippled out from Europe. Survey respondents said anxious international clients cancelled contracts and delayed decisions. Latest data pointed to the sixth straight monthly drop in export orders Notwithstanding a notable re-acceleration in services output in March, the first quarter of 2019 is set to be a disappointment.’

Australian Dollar (AUD) Fluctuates as RBA Hold Interest Rates Steady

The start of Tuesday’s session saw the Reserve Bank of Australia (RBA) hold interest rates steady at 1.5%, a move widely expected by markets.

The commentary in the March policy statement was generally dovish, as there was acknowledgement that the Australian economy ‘slowed’ during the second half of 2018.

In the statement on the monetary policy decision, RBA Governor, Philip Lowe said:

‘Other indicators suggest growth in the Australian economy slowed over the second half of 2018. The central scenario is still for the Australian economy to grow by around 3 per cent this year. The growth outlook is being supported by rising business investment, higher levels of spending on public infrastructure and increased employment. The main domestic uncertainty continues to be the strength of household consumption in the context of weak growth in household income and falling housing prices in some cities. A pick-up in growth in household income is nonetheless expected to support household spending over the next year.’

Lowe focuses on inflation, suggesting that underlying price growth will be 2% this year, although it may take longer than originally expected.

Following this decision, the Pound Australian Dollar (GBP/AUD) exchange rate remained muted.

Pound Australian Dollar Outlook: Will the GBP/AUD Exchange Rate Rise on a Dovish Lowe?

Looking ahead to the start of Wednesday’s session, the Australian Dollar (AUD) could slip following a speech entitled ‘The Housing Market and Economy’ by RBA Governor, Philip Lowe.

If Lowe’s tone continues to take a dovish stance, it could see the ‘Aussie’ slip against the Pound (GBP).

Following the speech, the Australian Bureau of Statistics is due to release GDP for Q4 2018.

Forecasts suggest that quarter-on-quarter GDP is going to rise by 0.3%. If GDP does not rise by as much, sentiment in the Australian Dollar could be dampened.

Later in the session Sterling could rally following Bank of England speeches from Sir Jon Cunliffe and Michael Saunders.

If the tone of their words is hawkish and upbeat about the post-Brexit economy, the Pound Australian Dollar (GBP/AUD) exchange rate could rise.

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