GBP/AUD Exchange Rate Firms on Upbeat UK PMIs
The Pound to Australian Dollar (GBP/AUD) exchange rate is trending higher this morning as markets welcome the UK’s latest PMI figures.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9600, up around 0.6% from today’s opening levels and striking a new two-week high.
Pound (GBP) Bolstered by Solid PMI Figures
The Pound (GBP) is trending higher against the Australian Dollar (AUD) and the majority of its other peers this morning, in response to the UK’s latest PMI figures.
According to data published by IHS Markit, the UK’s factory sector enjoyed a surprise expansion in growth this month, with the manufacturing index climbing from 50 to 51.9, the strongest reading since April last year.
This made up for a slight slowing of growth in the service sector this month and saw the private sector as a whole maintain its momentum from January.
The flash UK Composite Output PMI was unchanged at 53.3 in February as the fastest expansion in manufacturing production for 10 months helped offset softer services growth. The overall upturn was the joint-fastest since September 2018. https://t.co/HoIxbAbgaM pic.twitter.com/BualDHokP0
— S&P Global PMI™ (@SPGlobalPMI) February 21, 2020
GBP investors cheered the release, taking it as a clear sign that the UK economy will return to growth in the first quarter of 2020 after stagnating at the end of last year.
Tim Moore, Associate Director at IHS Markit, commented:
‘UK private sector growth held its ground in February as a stronger contribution from manufacturing output helped to keep overall business activity on a stronger path than any time since September 2018.
‘The recent return to growth signalled by the manufacturing and services PMIs provides a clear indication that the UK economy is no longer flat on its back, with our GDP nowcast pointing to 0.2% growth through the first quarter of the year.’
Australian Dollar (AUD) Tumbles as Coronavirus Fears Continue to Dominate Market Sentiment
At the same time, the Australian Dollar (AUD) is struggling this morning as the coronavirus crisis leaves the market in a decidedly risk-off mood.
Markets are growing increasingly concerned about the coronavirus’ impact on global growth as the human toll continues to rise and China’s economy looks increasingly likely to contract in the first quarter of 2020.
The ‘Aussie’ is extended its bearish trajectory overnight after World Health Organization (WHO) officials warned that the coronavirus or Covid-19 to give it, its official name, could become a global epidemic.
Businesses have already begun warning of the economic impact of the coronavirus, with the airline industry forecasting that it will lose nearly $30bn in 2020.
GBP/AUD Forecast: Brexit to Return to the Fore Next Week?
Looking ahead to next week’s session, the Pound to Australian Dollar (GBP/AUD) exchange rate may be infused with fresh volatility as traders turn their focus back to Brexit.
As the UK and EU gear up for the start of trade negotiations in March we are likely to see both sides begin to step up their rhetoric.
Expect this to weaken the appeal of Sterling if investors fear that clashes between the UK and EU will lead to limited progress and increase the chances of a no-deal Brexit at the end of 2020.
Meanwhile, for AUD investors it’s likely that coronavirus headlines will continue to dominate market sentiment, potentially limiting any upside in the risk-sensitive ‘Aussie’.