Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks, Australian Services Return to Growth in September

GBP/AUD Exchange Rate Falls as Australian Services PMI Emerges From Contraction Territory

The Pound Australian Dollar (GBP/AUD) exchange rate eased by -0.4% today, with the pair currently trading around AU$1.836 after September’s flash Australian services PMI beat forecasts and returned to growth at 52.5.

However, as September’s Australian manufacturing PMI contracted from 50.9 to 49.4, some of the Australian Dollar’s (AUD) gains were clipped against the Pound (GBP) today.

Gareth Aird, Senior Economist at the Commonwealth Bank of Australia (CBA), commented:

‘The dip in the manufacturing reading was a touch disappointing, particularly given the ongoing weakness in the Australian Dollar. It may be the case that the raft of so-called geopolitical tensions are having a dampening impact on the local manufacturing sector.’

‘Overall, it is a move in the right direction, but the level of the headline index continues to imply that the economy could do with more stimulus. With the [Reserve Bank of Australia] cash rate at record lows, the case for fiscal stimulus remains.’

Meanwhile, the risk-sensitive Australian Dollar benefitted from news that Australian Treasurer Josh Frydenberg has joined a coalition of nations calling for an end to the US-China trade war. However, as the trade dispute shows renewed signs of deterioration, AUD’s gains could be short-lived.

GBP/AUD Exchange Rate Dips as UK Markets Brace for Supreme Court Ruling

The Pound (GBP) remains subdued against the Australian Dollar (AUD) today as UK markets brace for a ruling from the Supreme Court on the legality of Prime Minister Boris Johnson’s parliamentary prorogation.

However, Conservative MP Rory Stewart dampened hopes of a breakthrough by stating it was unlikely the Prime Minister would respect the court’s ruling.

Mr Stewart added:

‘The danger is then we would move to a more [Donald Trump] form of politics where he would claim to represent the people against parliament.’

Mr Johnson also played down chances of a Brexit breakthrough at the UN summit this week, saying:

‘I don’t wish to elevate excessively the belief that there will be a… breakthrough. I’m not getting pessimistic – we will be pushing ahead, but there is still work to be done.’

Rising Brexit uncertainty and a dearth of UK economic data have seen Sterling struggle against the ‘Aussie’ so far this week but this could change if the Supreme Court finds against the government and lifts Brexit sentiment.

GBP/AUD Outlook: Sterling Could Rise on UN Brexit Breakthrough

Australian Dollar (AUD) investors will be awaiting tomorrow’s speech by Philip Lowe, the Governor of the Reserve Bank of Australia. Any dovish comments about the state of Australia’s economy would prove AUD-negative.

Pound (GBP) traders, meanwhile, will be awaiting tomorrow’s release of August’s public sector net borrowing figure, which is expected to improve from £-1.971 billion to £6.650 billion. As a result, we could see the GBP/AUD exchange rate improve.

The GBP/AUD exchange rate is likely to remain sensitive Brexit developments. Any indications that Boris Johnson could secure a Brexit deal with the EU at the UN summit could however provide some uplift for the Pound.

David Moore

Contact David Moore