Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks, RBA Governor Sees ‘Brighter Outlook’ for Australian Economy

GBP/AUD Exchange Rate Sinks, RBA Holds Interest Rates at Record-Low

The Pound Australian Dollar (GBP/AUD) exchange rate fell by around -0.5% today, with the pairing currently trading around AU$1.862.

The Reserve Bank of Australia (RBA) buoyed the Australian Dollar by keeping interest rates at a record low of 0.75% this morning following a marginal improvement in Australian unemployment figures and an uptick in inflation.

Philip Lowe, the RBA’S Governor, was hawkish in his post-decision statement:

‘The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices in some markets and a brighter outlook for the resources sector should all support growth.’

Improving US-China trade deal optimism also buoyed the AUD/GBP exchange rate, following reports that the US may reverse the September tariffs imposed on over $110 billion of Chinese imports.

Stuart Tait, HSBC’s Head of Commercial Banking for Asia Pacific, commented:

‘The importance of reducing tariffs and setting up new free trade zones… is music to the ears of Asian companies.’

With China representing Australia’s largest trading partner, today’s improvement of 51.1 in the Chinese Caixin Services PMI for October also buoyed market optimism in the ‘Aussie’.

GBP/AUD Exchange Rate Falls, UK Services Sector Fails to Improve in October

The Pound (GBP) fell against the Australian Dollar (GBP) after this morning saw the UK Services figure for October fail to break out of contraction territory, with ongoing Brexit uncertainty holding back the UK’s largest sector.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, was downbeat, saying:

‘Without any real expectation for significant change in October, the sector stuttered and stalled, delivering a lifeless set of results as new business from domestic and export markets dried up and orders fell for the second month in a row.’

Today also saw the release of the UK BRC Like-For-Like Retail Sales figure for October, which rose by 0.1% due to heavy discounting designed to entice discouraged consumers.

Helen Dickinson, the Chief Executive at BRC, commented:

‘Unfortunately, the longer term trend remains bleak with the 12-month average sales growth falling to a new low of just 0.1%. With Brexit still unresolved and a December election creating new uncertainties, retailers will be looking nervously at the months ahead.’

GBP/AUD Outlook: Could the ‘Aussie’ Rise on Improving Australian Construction Sector?

We could see the Australian Dollar (AUD) cling to some of today’s gains if tomorrow’s Australian AiG Performance of Construction Index for September shows any signs of improvement.

US-China trade developments will also remain in focus, with any sign of a consensus between the world’s two largest economies providing further uplift for the AUD/GBP exchange rate.

With no UK economic data due out tomorrow, Sterling traders will be looking ahead to Thursday’s interest rate decision from the Bank of England (BoE), which is predicted to hold at 0.75%. However, any dovish commentary from BoE Governor Mark Carney could weaken the GBP/AUD exchange rate.

David Moore

Contact David Moore