The Pound to Australian Dollar exchange rate trended flatly during Monday’s European session as investors awaited key economic news later in the week.
Last week saw GBP/AUD put in solid gains, advancing from 1.6780 to around 1.6940.
Pound Weakens as Investors Anticipate PMI Results
Monday’s UK data was disappointing and heightened concerns that the UK economy didn’t perform as strongly in June as hoped.
Markit’s UK manufacturing PMI for June was projected to slip from 56.7 to 56.5 but instead dropped to 54.3. The previous figure was also revised lower to 56.3.
While this result topped off the best quarter for factory growth since 2014, it indicated that the pace of growth was easing quicker than expected.
This increased speculation that other parts of the economy, such as the key services sector, may have also fallen short.
If Britain’s economic outlook worsens, the gains the Pound recorded thanks to higher Bank of England (BoE) tightening bets in the last few weeks could be undermined.
Australian Dollar (AUD) Steady Ahead of RBA Decision
The Australian Dollar has been unable to hold against the Pound’s strength in the last week. Mixed Australian ecostats and uncertainty about the Reserve Bank of Australia’s (RBA) monetary policy outlook have offset the recent improvements in commodity trade.
Prices of iron ore, Australia’s most lucrative commodity, have seen a solid recovery over the last week after hitting multi-month-lows in mid-June.
However, Monday’s Australian ecostats failed to provide the ‘Aussie’ with any additional support.
AiG published its June manufacturing PMI, which improved slightly from 54.8 to 55, but May’s Australian building approvals plummeted -5.6% on the month and -19.7% on the year.
As the RBA has expressed concerns about Australia’s overheating housing market in recent months, this data did little to bolster AUD.
GBP/AUD Forecast: ‘Aussie’ Could Weaken on RBA Caution
While it trended flatly on Monday, the Pound to Australian Dollar exchange rate could fluctuate this week with the RBA holding its July policy decision on Tuesday.
The tone taken by the Reserve Bank of Australia’s (RBA) will dictate how AUD performs, with a repetition of previous statements being Australian Dollar-neutral, but any notable changes having the potential to spark volatility.
Britain’s June services PMI is also likely to influence GBP/AUD.
As the services sector accounts for over 70% of total GDP, a disappointing report could send the Pound lower against the majors.