Pound Australian Dollar (GBP/AUD) Exchange Rate Tumbles Following Stunning Collapse in UK Construction Activity

GBP/AUD Exchange Rate Weakened by Gloomy PMI Figures

The Pound to Australian Dollar (GBP/AUD) exchange rate is on the back foot this morning, in response to the UK’s latest construction PMI.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9260, down roughly 0.4% from this morning’s opening rate.

Pound (GBP) Slumps Following Dire Construction PMI

The Pound (GBP) finds itself on the defensive against the Australian Dollar (AUD) and majority of other peers this morning on the back of some grim PMI figures.

According to data published by IHS Markit, the UK’s construction PMI nosedived from 39.2 to 8.2 in April, as the coronavirus lockdown saw the sector suffer its worst contraction on record.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, commented:

‘April’s figures delivered more worrying news for fragile construction businesses as the effects of the coronavirus continued to ripple across supply chains, devastating all productivity in its wake. Though a fall in output was not a complete surprise, the scale and suddenness of the drop has knocked the wind out of building work in the UK.’

Alongside the other PMI figures, this points to a startling collapse in UK economic growth in the second quarter. 

Australian Dollar (AUD) Supported by Record Surge in Retail Sales

Meanwhile, the Australian Dollar (AUD) held its ground through today’s Asian session, following the publication of Australia’s latest retail sales figures.

The Australian Bureau of Statistics (ABS) reported a record 8.5% jump in sales growth in March, as the coronavirus crisis triggered massive panic buying.

This surge was attributed to bumper food and alcohol sales as well as strong demand for household and electronic goods, which offset a collapse in spending on discretionary items such as clothing.

But any upside in the ‘Aussie’ was capped as economists warn this jump will be temporary, and likely sets up for a record slump in April.

Diana Mousina, senior economist at AMP Capital warns:

‘It’s expected that slower growth in food spending over April will not be enough to offset the collapse in eating out, recreation and clothing retailing as a lot of these businesses were forced to close.

‘Credit card spending data from the major banks shows that overall spending is still down around 20% from a year ago. We expect the April retail sales figures to show the largest fall on record.’

GBP/AUD Exchange Rate Forecast: BoE Forecasts in Spotlight

Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate could face some volatility in the latter half of the week as the Bank of England (BoE) concludes its latest policy meeting.

While the BoE is widely expected to leave its monetary policy unchanged this month, having slashed interest rates to a record low back in March, there will plenty for GBP investors to digest with the publication of the bank’s latest forecasts.

This is likely to see policymakers play down the prospect of a ‘V-shaped’ recovery, with the BoE expected to warn of a 10-15% hit to the UK economy as a result of the coronavirus crisis, witch such a gloomy outlook likely to dampen Sterling sentiment.

In the meantime, the publication of Australia’s latest trade figures could drag on the ‘Aussie’ overnight , as economists forecast the coronavirus pandemic will have triggered a sharp slump in both imports and exports in March.

Matthew Andrews

Contact Matthew Andrews