GBP/AUD Exchange Rate Muted On UK PMI Data
The Pound to Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning in response to another gloomy UK PMI release.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9384, having retreated from AU$1.9523 and is now virtually unchanged from this morning’s opening rate.
Pound (GBP) Undermined by Underwhelming PMI Release
The Pound (GBP) finds itself rangebound this morning, walking back some initial gains in the wake of weaker-than-expected PMI figures.
According to data published by IHS Markit, the UK’s composite PMI stumbled from 49.3 to 48.5 in December, missing expectations for a modest rise to 49.6.
Flash UK Composite Output PMI falls to near three-and-a-half-year low in December (48.5; 49.3 – Nov). Notably, manufacturing output fell at a rate exceeded only once since the global financial crisis, while services recorded back-to-back declines. More: https://t.co/RX2gmqqyuW pic.twitter.com/Nk3mzG7N30
— S&P Global PMI™ (@SPGlobalPMI) December 16, 2019
The continued slump in the UK’s private sector is stoking fears that UK GDP will have contracted in the fourth quarter as the country wrestled with Brexit uncertainty.
Chris Williamson, Chief Business Economist at IHS Markit, said:
‘December’s PMI survey data sadly lacked festive cheer, indicating that the economy contracted for the third time in the past four months.
‘The latest decline was the second-largest recorded over the past decade, and increases the likelihood that the economy contracted slightly in the fourth quarter as Brexit-related uncertainty intensified in the lead up to the general election.’
Australian Dollar (AUD) Undermined by Lack of Details on US-China Trade Deal
The Australian Dollar (AUD) is trading on the back foot at the start of this week in response to some market trepidation over the recent announcement of a US-China trade deal.
On Friday, in separate press conferences, Washington and Beijing announced that they had reached an agreement on a ‘phase one’ trade deal.
However outside of China’s promise to buy more US agricultural products and a lowering of some of the tariffs the White House has imposed on China, details remain thin on the ground.
This is causing some jitters amongst traders this morning and limiting the appeal of the risk-sensitive ‘Aussie’.
Economists at ING, explain:
‘What the market needs now, though, is clarity around exactly what the deal entails. The longer we have to wait for this detail, the more likely market participants will start to question how good a deal it actually is.’
There are also some concerns that the deal could still yet fall apart, as the translation of the text could lead to the inclusion of some last minute revisions.
GBP/AUD Forecast: UK Employment Figures to Drag on Sterling?
Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate could face some pressure tomorrow with the publication of the UK’s latest employment report.
This is expected to show that wage growth slowed sharply in October, likely souring Sterling sentiment.
In the meantime the publication of the minutes from the Reserve Bank of Australia (RBA) could limit the appeal of the ‘Aussie’ later tonight, especially if they signal the bank will continue to cut rates in 2020.