GBP/AUD Exchange Rate Weighed Down by Intensifying Brexit Anxiety
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate remained volatile over the course of last week’s session, spiking to interbank rates of AU$1.8446 on Wednesday.
The pairing saw growth after the release of the Caixin manufacturing PMI for December showed a larger-than-forecast fall from 50.2 to 49.7, showing factory activity in China had contracted for the first time in 19 months.
Wednesday also saw the release of the UK’s Markit manufacturing PMI. Despite seeing better-than-forecast growth to 54.2, sentiment for Sterling was dampened by this increase likely being a result of stockpiling ahead of the UK’s departure from the European Union.
Thursday’s release of the UK construction PMI falling to a lower-than-expected 52.8, kept the GBP/AUD exchange rate weighed down, although the data did show a boost in business optimism to an eight-month high.
Despite higher-than-forecast growth in the UK’s Markit services PMI to 51.2, the ‘Aussie’ still remained buoyed throughout the week’s session, as the data revealed that UK business confidence was at its second lowest since 2009.
Chris Williamson, chief business economist at IHS Markit said the service sector ‘is now showing worrying signs of having lost steam amid intensifying Brexit anxiety.’
Australian Dollar (AUD) Exchange Rate Buoyed by US-China Trade Talks
Australian Industry Group released figures regarding the performance within the Australian manufacturing sector, which fell from a previous 51.3 to 49.5 in December, contracting for the first time in over two years. Despite this poor data release, the Pound remains weighed down compared to the previous week.
Trade talks between the US and China beginning in Beijing today mark the first formal meeting between the US and China since Presidents Trump and Xi agreed upon the 90-day temporary truce, which could be a likely reason for the volatility within the currency pairing.
While there is scepticism about whether these talks will see a resolution, Trump stated: ‘I think China wants to get it resolved. Their economy’s not doing well.’
GBP/AUD Exchange Rate Forecast: Will US-China Trade Talks Strengthen AUD?
As trade talks take place between the US and China Beijing, it seems likely that any developments will cause movement within the currency pairing, with any positive developments likely to cause the Australian currency to strengthen.
In the UK, the release of the Halifax house prices figures could see the Pound rise against AUD if the forecasts suggesting a rise from 0.3% to 0.4% in November compared to last year are correct.
The forecast for November’s Australian retail sales figures suggest it will remain steady at 0.3%, although if there is any growth it could strengthen the ‘Aussie’.
The UK’s Gross Domestic Product figure for November is also set to be released this week, with the forecast suggesting it is going to remain steady at 0.1%, although an increase could see Sterling push back against AUD.