Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Could Jump on RBA Decision

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate is currently trading at an inter-bank rate of AU$1.8062, but Sterling could climb tomorrow depending on the outcome of the Reserve Bank of Australia’s (RBA) latest interest rate decision.

Pound Australian Dollar (GBP/AUD) Exchange Rate Flat as UK Manufacturing PMI Falls to 76-Month Low

On Monday data showed that the UK manufacturing PMI fell to a 76-month low.

Sterling was left dampened as the PMI fell for the third consecutive month from May’s 49.4 to 48 in June.

Added to this, manufacturing production plummeted at the fastest pace since October 2012 and business optimism fell to its third-lowest level in the series’ history.

Commenting on the data, Director at IHS Markit, Rob Dobson said:

‘The downturn in UK manufacturing deepened during June, as the impact of firms unwinding stockpiles built before the original Brexit date continued to reverberate through the sector and exacerbate weak demand. This led to solid decreases in both production and new orders, which sank the headline PMI to its lowest in almost six-and-a-half years.

‘The stranglehold of sustained Brexit-related uncertainty and disruption also weighed heavily on business confidence and employment, as optimism ebbed to one of its lowest levels in the survey history and staff headcounts were reduced for the third straight month.’

Australian Dollar (AUD) Flat on Disappointing China PMI

However, the GBP/AUD exchange rate’s losses were limited as data revealed that China’s Caixin Manufacturing PMI fell below the 50-mark in June.

The PMI fell to a lower-than-forecast 49.4 from May’s 50.2 thanks to ongoing trade tensions.

Both total new business and international sales declined at the end of Q2 2019.

Australian Dollar sentiment was dampened by the data.

Commenting on the data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

‘China’s economy came under further pressure in June. Domestic demand shrank notably, foreign demand was still underpinned by front-loading exports, and business confidence fell sharply.’

US-China Trade Discussions ‘Back on Track’

On Saturday, US President Donald Trump and Chinese Leader Xi Jinping agreed to resume trade discussions, providing an upswing in support for the risk-sensitive ‘Aussie’.

While the agreement did not lead to a major breakthrough, it is a temporary ceasefire which gives negotiators a chance to come to an agreement on a US-China trade deal and increased risk-appetite.

Speaking to reporters after his meeting with Xi, President Trump said:

‘We discussed a lot of things, and we’re right back on track.

‘We had a very, very good meeting with China. I would say probably even better than expected, and the negotiations are continuing.’

Pound Australian Dollar Outlook: Will Another RBA Rate Cut Weigh on AUD?

Looking ahead to the start of Tuesday’s session it is likely the Australian Dollar (AUD) will fall against the Pound (GBP) following the Reserve Bank of Australia’s (RBA) interest rate decision.

If the RBA slashes interest rates once again from 1.25% to 1%, it could dampen sentiment in the ‘Aussie’.

Meanwhile, Sterling could rise following the release of the UK construction PMI.

If data reveals June’s PMI edges out of contraction territory, the Pound Australian Dollar (GBP/AUD) exchange rate could rise.

Millie Empson

Contact Millie Empson