GBP/AUD Exchange Rate Subdued on Abysmal UK PMI Reading
The Pound to Australian Dollar (GBP/AUD) exchange rate is on the defensive this morning as markets react to the UK’s latest PMI figures.
At the time of writing the GBP/AUD exchange rate is trading at around AU$2.0474, virtually unchanged from this morning’s opening rate.
Pound (GBP) Dented by Dire PMI Figures
The Pound (GBP) is struggling to find support this morning as data showed business activity in the UK plunged to a record low last month.
According to finalised figures published by IHS Markit, the UK’s composite PMI plummeted from 53.0 to 36.0 in March, slight below preliminary figures estimating a fall to 36.2.
UK Composite Output PMI ⬇️ to 36.0 in March, led by a slump in services activity as shops were closed to slow the COVID-19 outbreak. Latest PMI figures consistent with an over 1.5% qr/qr fall in GDP. More: https://t.co/73y7CXKyEZ pic.twitter.com/FQ51W3s5Ae
— S&P Global PMI™ (@SPGlobalPMI) April 3, 2020
This of course comes as the coronavirus crisis and lockdown imposed by the government brought activity in the UK private sector to a screeching halt last month.
To make things worst this is only the start of things to come as analysts warn the slump will only get worse in the months to come.
Tim Moore, Economics Director at IHS Markit, comments:
“A record slump in UK service sector activity reported in March adds to the increasingly bleak economic statistics seen recently across the developed world. Emergency public health measures to combat the COVID-19 pandemic continue to mothball business operations, force aggressive cutbacks on non-essential expenses and trigger distress for household finances.’
‘The UK economy is now almost certain to experience a deep contraction in the second quarter of the year,’
Bump in Retail Sales Offers Limited Support for the Australian Dollar (AUD)
At the same time, the Australian Dollar (AUD) is ticking higher this morning in response to Australia’s latest retail sales figures.
Australian Bureau of Statistics (ABS) reports retail sales growth rose 0.5% in February, rebounding from a 0.3% contraction at the start of the year and beating forecasts for a 0.4% rise.
The rise appeared to be driven in part by panic buying as people rushed to buy food and other essentials as the coronavirus began to spread around the world.
Ben James, Director of Quarterly Economy Wide Surveys at ABS, said:
‘Retailers reported a range of impacts from COVID-19 in February … with increases in food retailing slightly offset by falls in more discretionary spending.’
Further GBP/AUD Exchange Rate Forecast: Coronavirus Crisis to Remain in Focus
Looking ahead to next week, it’s safe to assume the coronavirus crisis will continue to dominate movement in the currency market.
As such we may see the Pound to Australian Dollar (GBP/AUD) exchange rate infused with fresh volatility.
AUD investors will be particularly interested in the Reserve Bank of Australia’s (RBA) latest policy meeting.
While the RBA is not expected to cut rate again, having only just slashed them to a record low following two cuts in March we may see the bank outline plans to introduce more quantitative easing to help support Australia’s economy through the coronavirus pandemic.