Pound Sterling Australian Dollar Exchange Rate News: GBP/AUD Muted as Brexit Stockpiling Dampens UK Manufacturing PMI

GBP/AUD Exchange Rate Steady as Brexit Stockpiling Takes the Shine off of UK Factory Growth

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning as markets react to the latest UK Manufacturing PMI

At the time of writing the GBP/AUD exchange rate is flat, with the pairing having slipped after accelerating 0.4% ahead of this morning’s European session.

Pound (GBP) Flat Despite Surprise Upswing in Manufacturing PMI

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate was range bound on Wednesday morning following the release of the UK’s latest manufacturing PMI.

According to data published by IHS Markit, UK factory activity unexpectedly accelerated in December, with the index rising from 53.6 to 54.2 against expectations of a drop to 52.5.

While this saw the manufacturing sector expand at its fastest pace since June, the release failed to provide a boost to Sterling sentiment.

This appeared to be down to suggestions that the upswing in growth would likely prove temporary, driven higher mainly by increased demand from businesses and individuals who sought to stockpile ahead of a potentially disruptive Brexit.

Rob Dobson, Director at IHS Markit suggests:

‘Stocks of purchases and finished goods both rose at near survey-record rates, while stock-piling by customers at home and abroad took new orders growth to a ten-month high.

‘Any positive impact on the PMI is likely to be short-lived, however, as any gains in the near-term are reversed later in 2019 when safety stocks are eroded or become obsolete.’

Australian Dollar (AUD) Exchange Rates Muted Following Disappointing Chinese Data

At the same time the Australian Dollar (AUD) also struggled to find its feet this morning as the ‘Aussie’ was knocked by the release of China’s own manufacturing PMI.

Data released overnight revealed Chinese factory activity contracted for the first time in 19 months in December.

This saw demand for the Australian Dollar soften as markets opened for the first day of trade in 2019, with AUD investors fearing a slowdown in China could dent demand for Australian exports and weaken Australia’s trade driven economy.

GBP/AUD Exchange Rate Forecast:

Looking ahead, the release of the UK’s latest Services PMI is likely to be a key driver of movement in the Pound Australian Dollar (GBP/AUD) exchange rate in the latter half of the week, with Sterling likely to slide if service sector activity remained muted in December as forecast.

On top of this the Pound will also have to contend with ongoing Brexit uncertainty, with investor jitters likely to become more pronounced as we near the parliamentary vote on Theresa May’s Brexit deal later this month.

Meanwhile, with no Australian economic releases of note this week, AUD exchange rates are likely to be driven by external influences, with the US non-farm payrolls potentially dampening the appeal of the ‘Aussie’ if an expected rise in payrolls lifts the US Dollar (USD) and dents market risk appetite.

Matthew Andrews

Contact Matthew Andrews