Pound to Australian Dollar (GBP/AUD) Exchange Rate Tumbles from Highs Despite Solid UK Construction Report
UPDATE: Investors have opted to buy the risk-correlated Australian Dollar (AUD), helping it bounce back from its lows on Tuesday morning, following the Reserve Bank of Australia’s (RBA) latest policy decision.
Despite the RBA noting that Australian inflation was likely to remain low for some time, investors bought the cheap ‘Aussie’ from its lows and the Pound to Australian Dollar (GBP/AUD) exchange rate fell back towards the week’s opening levels, making a 0.4% loss on the day.
Demand for the Australian Dollar saw further support on Tuesday afternoon, as China promised it would not start a currency war with the US in response to US trade tariffs.
GBP/AUD Held Back Despite Trade Fears Driving Demand for Safe Havens
UPDATE 14:40 BST: The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate’s movement remained limited on Monday afternoon, as Sterling (GBP) failed to gain on Australian Dollar (AUD) weakness.
Global trade jitters persisted throughout the day, as US stock markets opened lower and traders sought out safer investments.
Little had changed about the GBP/AUD outlook since the morning, but the Australian Dollar remained supported as investors anticipated Tuesday’s Reserve Bank of Australia (RBA) decision.
Pound to Australian Dollar Exchange Rate Fluctuates on Mixed Manufacturing Results
Despite persistent trade war jitters keeping pressure on the Australian Dollar, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has seen mixed movement since markets opened.
Last week, Brexit uncertainties and trade fears saw GBP/AUD fluctuate between interbank highs of AU$1.79 and lows of AU$1.77. However, the pair ultimately ended the week quite closel to the week’s opening levels, in the region of AU$1.78.
On Monday, GBP/AUD is holding steady as Britain’s latest manufacturing PMI results beat expectations, while Australia’s manufacturing PMI was also solid.
Pound (GBP) Exchange Rates Edge Higher as UK Manufacturing PMI Beats Forecasts
While Brexit uncertainties and the ever-present spectre of a possible ‘no deal’ Brexit kept the Pound (GBP) pressured on Monday, Britain’s latest manufacturing stats did something to support the British currency.
Monday morning saw the publication of June’s manufacturing PMI from Markit, which beat forecasts of 54 and rose to 54.4.
The previous figure weighed slightly on the positivity of the report however, as it was revised down from 54.4 to 54.3.
On top of this, while the manufacturing data did beat forecasts businesses weren’t particularly optimistic. Taken from the Markit’s accompanying report:
‘Although the rate of increase in new business edged up to a three-month high, it remained among the weakest registered over the past year- and-a-half.
Some firms expressed concerns about input price increases, possible future trade tariffs, the exchange rate and Brexit uncertainty.’
With markets choosing to focus on this gloomy interpretation, the Pound (GBP) found itself limited in its gains against the Australian Dollar (AUD).
Australian Dollar (AUD) Exchange Rates Avoid Major Losses as Australian Manufacturing Figures Lend Support
The Australian Dollar (AUD) saw relatively sturdy trade on Monday morning despite persistent global trade fears, as the currency continued to find support following its rebound last week.
Investors opted to buy the Australian Dollar from its worst levels last week, thanks to some fleeting hopes that the US would row back on some of its more controversial plans for trade with China.
While these hopes were short-lived, other trade factors, such as strong commodity prices, kept the Australian Dollar buoyant.
On Monday, Australia’s June manufacturing PMI from AiG impressed markets and gave the ‘Aussie’ additional support ahead of Tuesday’s Reserve Bank of Australia (RBA) policy decision.
The manufacturing PMI was expected to have slowed markedly, but instead only slowed slightly from 57.5 to 57.4. The figures were seen as an encouraging sign for Australia’s economy.
Pound to Australian Dollar (GBP/AUD) Forecast: Reserve Bank of Australia (RBA) in Focus
Part of the Australian Dollar’s (AUD) sturdy performance on Monday has been market anticipation for Tuesday’s Reserve Bank of Australia (RBA) policy decision.
Investors are hesitant to move too much on the Australian Dollar ahead of the decision, although analysts don’t expect any notable developments from the bank.
The RBA is expected to leave Australian monetary policy frozen, but investors will be more focused on the bank’s tone regarding the economic outlook and how the nation may be impacted by US trade policies.
If the bank shows heightened concern about the possibility of a US-China trade war, or the impact such a clash may have on other economies, the Australian Dollar could weaken relative to the Pound (GBP).
Of course, key data could influence GBP/AUD too. Wednesday’s Australian trade balance results and UK services PMI data could influence the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate if they surprise traders.