Update 3: UK Services PMI Disappoints, Pound Sterling Holds Losses vs Australian Dollar
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate remained trending lower as the UK’s services PMI came in below forecast.
The measure of the UK’s all-important services sector slid from 55.6 to 53.8 in November.
A reading of 55.0 had been expected, and as the UK services sector accounts for over 70% of total economic output, the result weighed on Pound Sterling exchange rates.
Update 2: RBA Wage Comments Send Australian Dollar Exchange Rate Soaring
The Pound Australian Dollar exchange rate approached a 17-month high on Monday amid hopes for a Brexit deal, but the Reserve Bank of Australia’s (RBA) interest rate decision saw Sterling lose over 1% against the ‘Aussie’ overnight.
The interbank GBP/AUD exchange rate fell from 1.77 to 1.74 as the Australian Dollar broadly strengthened.
Update 1: GBP/AUD Exchange Rate Stabilises on Hopes Irish Border Concessions will lead to Trade Talks
Sterling continues to hold close to highs struck earlier today as the UK government ‘conceded’ over the Irish border, the final piece of the puzzle in Britain’s exit agreement.
Markets are hoping that this will be the breakthrough needed for Brexit negotiations to move to the second stage after months of back and forth between the two sides.
EU leaders will convene later this month as a Summit in Brussels, where it is now hoped that they will vote to allow Brexit trade discussions to finally get underway, much to the relief of investors.
Pound to Australian Dollar (GBP/AUD) Rate Rallies on Hopes of Irish Border Solution
Rising optimism about Brexit talks sent the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate higher on Monday.
The Pound has risen sharply against the Australian Dollar and most other peers today, thanks to growing optimism about future Brexit negotiations.
Last week the GBP/AUD exchange rate climbed to some of its best levels since the UK’s vote to Brexit, following fresh speculation that stalled Brexit talks could get moving again.
Gains were partly caused by speculation about the Irish border issue, with traders latching onto rumours about the UK finding an immediate solution to the problem.
More recent GBP gains have also come from Irish border news – it has been reported that the UK government has agreed to no ‘regulatory divergence’ between Ireland and Northern Ireland.
This means that fears of a hard border are greatly diminished, although the Northern Irish DUP could theoretically reject UK government proposals in this area.
Growing Push for US Tax Reforms Damages Australian Dollar
While the Pound is climbing on domestic news, the Australian Dollar has lost ground because of overseas developments.
Over the weekend, the US Senate approved tax reform plans, strengthening USD and reducing demand for higher-risk assets.
GBP/AUD Forecast: PMI Data in Focus
This week, while Brexit news will remain in the spotlight, Pound/Australian Dollar exchange rate movement may also be caused by UK PMI activity measures and UK trade balance figures.
Unlike the recent construction reading, Tuesday’s services PMI is forecast to have declined slightly in November.
A slowing services sector is bad news for the UK economy, as it contributes the most to national economic growth, but the index may not have much impact if Brexit news remains positive.
Later in the week, Friday’s trade balance result for October is tipped to show a reduction in the deficit.
There’s also plenty of Australian news for investors to sink their teeth into.
Starting the ball rolling, the Reserve Bank of Australia (RBA) will make its last interest rate decision of 2017 on Tuesday.
RBA policymakers are not expected to hike or cut interest rates, but could still drop some hints about monetary policy in 2018.
Suggestions that there could be one or several interest rate hikes next year would send the Australian Dollar higher, while policymakers remaining firmly in wait-and-see mode would be AUD negative.
Wednesday’s Q3 GDP growth reading could support the ‘Aussie’ however as it’s set to show a year-on-year rise from 1.8% to 3%.
Such a result would help offset the impact of a suspected narrowing in the domestic trade surplus.
Data Affecting This Week’s Australian Dollar Exchange Rate Forecast
5th December 03:30 AU Reserve Bank of Australia (RBA) Interest Rate Decision
5th December 09:30 UK Services PMI (NOV)
6th December 00:30 AU GDP Growth Rate YoY Q3
6th December 00:30 AU GDP Growth Rate QoQ Q3
7th December 00:30 AU Balance of Trade (OCT)
7th December 00:30 AU Reserve Bank of Australia (RBA) Bulletin
8th December 09:30 UK Balance of Trade (OCT)