GBP/AUD Exchange Rate Flat Following UK Services PMI
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning as markets digest the UK’s PMI figures.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8608, almost unchanged from the morning’s opening rate but leaving the pairing close to a one-month high.
Pound (GBP) Steady as UK Services Sector Rebounds
The Pound (GBP) was left rangebound against the Australian Dollar (AUD) and the majority of its other peers this morning as markets reacted to the UK’s latest services PMI.
According to data published by IHS Markit, the UK service sector clawed its way back to growth last month, with the index climbing from 48.9 to 50.4 in April.
While this return to growth was welcomed by GBP investors, it failed to buoy Sterling this morning as – when viewed alongside the UK’s manufacturing and construction PMIs – it is clear that the UK’s private sector remains broadly subdued.
Chris Williamson, Chief Business Economist at IHS Markit, said:
‘A near-stagnant service sector in April means that all three major parts of the economy were struggling to grow in April. Although the service sector joined construction in reporting a return to growth, in both cases the expansions were only marginal.
‘An upturn in manufacturing is meanwhile showing signs of waning, as a temporary boost from Brexit-related stockpiling faded in April.’
This suggests that the UK economy likely got off to a poor start in the second quarter, limiting the appeal of the Pound for the remainder of this week’s session.
Australian Dollar (AUD) Muted as Services Contract
Meanwhile the Australian Dollar (AUD) was left on the defensive during the Asian session on Friday following the publication of Australia’s own services index.
While the Australian Industry Group (Ai Group) reported that its Performance of Services Index (PSI) improved last month, rising from 44.8 to 46.5, this still resulted in the index remaining in negative territory, signalling the service sector’s fourth consecutive month of contraction.
On top of this, the index also revealed that employment and wage growth in the service sector actually fell last month, a particular concern for AUD investors given that the sector is Australia’s largest employer.
This slowdown looks unlikely to end any time soon either, with businesses growing increasingly gloomy in their outlook for 2019.
GBP/AUD Exchange Rate Forecast: Is there a 50/50 Chance of an RBA Rate Cut Next Week?
Looking ahead, movement in the Pound Australian Dollar (GBP/AUD) exchange rate looks set to be dominated by the Reserve Bank of Australia’s (RBA) rate decision next week as economists forecast there is a 50% chance that the bank could cut interest rates next week.
However a cut would still likely come as a surprise as historically the odds of a cut are far higher in the month before rates are lowered.
Even if the bank doesn’t cut interest rates next week we could still see AUD exchange rates move lower on Tuesday if the bank’s forward guidance makes it clear that a rate cut is on the cards this year.
Meanwhile the focus for GBP investors will be on the publication of the UK’s latest GDP figures at the end of the week, with Sterling potentially finding some support if domestic growth accelerated in the first quarter as economists expect.