UK Construction Sector Rebound Fails to Hold up GBP/AUD Exchange Rate
UPDATE: A modest rebound in the UK construction PMI was not enough to prevent the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate softening this morning.
Although the sector recovered from March’s contraction Pound Sterling (GBP) was unable to hold onto its earlier bullishness as markets braced for the Bank of England (BoE) policy announcement.
Any downgrades to the forecasts in the BoE’s latest quarterly Inflation Report could see the GBP/AUD exchange rate slump sharply this afternoon.
GBP/AUD Exchange Rate Hits Monthly High on Hopes of Brexit Compromise
UPDATE: A weaker-than-expected month of UK mortgage approvals also failed to weaken the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate today.
Even as the UK economy continued to demonstrate signs of weakness as a result of Brexit disruption the mood towards the Pound remained generally positive.
Hopes that a Brexit compromise is on the cards as talks between Labour and the Conservatives continue kept the Pound on an uptrend throughout the day, pushing the GBP/AUD exchange rate to a fresh monthly high.
Brexit Optimism Keeps Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate near Three-Week High
A renewed sense of optimism over Brexit helped to keep the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate on an uptrend this morning.
Although April’s UK manufacturing PMI eased as forecast, slipping from 55.1 to 53.1 on the month, this failed to drag down demand for Pound Sterling (GBP).
While falling export orders proved to be a major drag on the manufacturing sector at the start of the second quarter the mood of GBP exchange rates remained generally positive.
Hopes that reportedly ‘constructive’ talks between the Labour and Conservative leaderships could lead to a workable compromise on Brexit gave investors incentive to favour the Pound over its rivals.
As a result, the GBP/AUD exchange rate continued to trend in the region of its three-week high today.
Manufacturing Sector Uptick Fails to Boost Australian Dollar (AUD) Exchange Rates
A solid uptick in April’s Australian manufacturing PMI failed to shore up AUD exchange rates, meanwhile.
Even though the index strengthened from 51 to 54.8, signalling a decent acceleration in sector growth, this was not enough to bolster demand for the Australian Dollar (AUD) this morning.
Signs of weakness from the New Zealand economy put pressure on the antipodean currency overnight, with markets still having limited confidence in the outlook of the Australian economy.
Mounting anticipation ahead of the latest Federal Reserve policy announcement also weighed on the Australian Dollar, in spite of investors anticipating that interest rates will remain on hold for some time to come.
GBP Exchange Rates Vulnerable Ahead of BoE Meeting
The appeal of Pound Sterling could diminish tomorrow, however, on the back of the Bank of England’s (BoE) April policy meeting.
While no change in monetary policy is likely at this stage the nature of comments from BoE Governor Mark Carney could still provoke significant volatility for the GBP/AUD exchange rate.
If the BoE appears to maintain a more optimistic outlook on the UK economy, in spite of ongoing Brexit-based uncertainty, this may give the Pound a fresh rallying point.
However, after the Pound’s recent bullish run the upside potential of GBP exchange rates may prove limited ahead of the weekend, even if the BoE takes a less dovish tone.
Contracting Service Sector to Weigh on Australian Dollar (AUD)
Thursday’s Australian services PMI could see the Australian Dollar shedding further ground unless it fails to recover from the previous month’s contraction.
As the PMI clocked in at just 44.8 in March, demonstrating another period of shrinking growth in the service sector, investors remain wary ahead of the data.
If the service sector returned to a state of growth at the start of the second quarter this could encourage a greater sense of optimism in the economic outlook.
On the other hand, another month of contraction would leave AUD exchange rates vulnerable to further selling pressure as investors continue to weigh up the odds of an imminent Reserve Bank of Australia (RBA) interest rate cut.