The current week has been a bad one for the Pound so far, with the currency suffering due to little positive UK news.
The Australian Dollar has been making opposite movement, having advanced against the Pound and other peers for two days in a row on supportive sentiment and ecostats.
Pound Sterling Dives as OECD Report Eclipses Marginal Manufacturing Positivity
The Pound has dropped off in a major way against the Australian Dollar of late, owing to both damaging conditions at home but also the continued strength of the ‘Aussie’.
UK news so far has been decidedly negative, an issue compounded by the fact that it has also been fairly limited. Yesterday’s Lloyds business barometer for May fell from 38 to 32, the lowest recorded figure since 2013.
More recently, the manufacturing PMI for May has only just managed to escape the contraction range, by rising from 49.4 to 50.1. This slightly positive news was almost immediately overridden by the OECD’s latest growth rate forecast, which has put the UK’s estimated growth in 2016 at 1.7%, down from a previous 2.1%.
Australian Dollar Continues Bull Run after National GDP Exceeds Forecasts
The ‘Aussie’ has been a safe bet so far this week, on account of the latest GDP-based developments.
On Tuesday, the ‘Aussie’ was boosted considerably when forecasts were made for a strong GDP printing for the first quarter.
This optimism stemmed largely from the news that net exports rose by a relatively large 1.1% in Q1.
Fortunately for the Australian Dollar, this optimism proved to be warranted and against predictions of declines on the quarter and the year, GDP actually rose in the first quarter, from 0.7% to 1.1% and from 2.9% to 3.1% respectively.
Less supportive has been the AiG manufacturing index for May, which has fallen, although this does not seem to have dented the overall appeal of the ‘Aussie’.
GBP/AUD Exchange Rate Forecast
For the remainder of the current week, Pound Sterling/Australian Dollar exchange rate movement may occur as a result of tomorrow’s Australian trade balance stats for April, as well as the UK’s construction PMI printings for May. The current trade deficit is expected to reduce slightly, while UK construction has a decline in output on the cards.
The week will close for both currencies with services data for May; current forecasts are optimistic for Australia and pessimistic for the UK. Such an outcome in the latter case could cause a great deal of damage to the Pound due to previous signs that the services sector is largely holding up the otherwise flagging manufacturing and construction sectors.
Heads Up
Summary of major upcoming data releases that we think may move the market.