Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks despite Expectations RBA will Cut Interest Rates Tomorrow

GBP/AUD Exchange Rate Falls as Australian and UK Manufacturing Sectors Slow

The Pound Australian Dollar (GBP/AUD) exchange rate is down today and is currently trading around AU$1.818 on the interbank market.

The Australian Dollar (AUD) gained on the Pound (GBP) despite yesterday’s release of the AiG performance of manufacturing index, which slowed to 52.7 against April’s 54.8.

Innes Willox, an Ai Group CEO, was dovish, commented:

‘While Australia’s manufacturing sector continued to grow in May, performance was mixed across the range of manufacturing industries and there are signs of further softening in the months ahead.’

‘Aussie’ investors are remaining downbeat ahead of the Reserve Bank of Australia’s (RBA) announcement of its interest rate decision tomorrow – which is expected to be trimmed to 1.25%.

GBP/AUD Exchange Rate Slips as UK Manufacturing Contracts First Time Since EU Referendum Result

The Pound, meanwhile, fell following the release of the UK Markit Manufacturing PMI figures for May, which contracted to 49.4 – falling below the consensus increase of 52.0.

Rob Dobson, a Director at IHS Markit, was downbeat, saying:

‘The UK manufacturing sector was buffeted by ongoing Brexit uncertainty again in May. The headline PMI posted 49.4, moving back into contraction territory for the first time since July 2016, the month directly following the EU referendum result.’

US President Donald Trump has arrived in the UK for a state visit, heightening controversies following the US ambassador’s comments that the NHS could come under US business interest post-Brexit.

However, as Brexit progress appears to have stalled, and uncertainty continues surrounding the future leader of the Conservative Party once Theresa May steps down on Friday, this has left many Sterling traders feeling cautious.

Jeremy Hunt, the Secretary of State for Foreign Affairs has dampened UK market hopes, saying:

‘I’ve always said that in the end, if the only way to leave the European Union, to deliver on the result of the referendum, was to leave without a deal, then I would do that.’

AUD/GBP Exchange Rate Rises as Chinese Manufacturing Improves Despite US-China Trade War

Australia is heavily reliant on an expanding Chinese economy and today’s Caixin manufacturing PMI figures for May reassured, rising above the consensus to 50.2.

However, as the US-China trade war continues, many AUD traders are remaining cautious.

Zhengsheng Zhong, the Director of Macroeconomic analysis at the CEBM Group, said:

‘The trade tensions between the United States and China are having an impact on confidence.’

GBP/AUD Outlook: RBA Interest Rate Decision in Spotlight

Sterling (GBP) traders will be looking ahead to tomorrow’s publication of the Markit construction PMI figures for May, which are expected to hold steady at 50.5.

‘Aussie’ traders, meanwhile, will be awaiting the RBA interest rate decision, with any cut in base rates liable to weaken demand for AUD.

Tomorrow will also see the release of the Australian retail sales figures for March, which are expected to increase by 0.2%.

The Pound Australian Dollar (GBP/AUD) will remain driven by ongoing political developments within the UK, with both Brexit and the Conservative leadership remaining in question, leaving markets in a state of uncertainty.

David Moore

Contact David Moore