Australian Dollar (AUD) Extends Gains on Full Clutch of Positive Data
(Updated 15:45, 02/9/21) The Australian Dollar (AUD) has resumed its upward trajectory against the Pound (GBP), having previously levelled slightly, as a full clutch of positive data boosts the ‘Aussie’ while pressuring GBP.
From this morning’s upbeat balance of trade data, the country went on to print a lesser-than-expected decline in home loans for the month of July. Other, less significant data reported growth exceeding expectations in imports and exports.
Meanwhile, the Pound is open to losses against its peers, on a lack of trading stimuli. Concerns over children returning to school have been reiterated by leading government figures, including Professor Neil Ferguson, who was a leading figure in the Government’s original Covid response in early 2020.
Professor Ferguson remarked this afternoon that if daily cases start going above 100,000 to 150,000 there will be ‘significant demands on the health system’.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Hits a Monthly Low on Upbeat Aussie Data
The Pound (GBP) has fallen against the Australian Dollar (AUD) as the ‘Aussie’ prints a higher-than-expected trade surplus. Meanwhile, the Pound is subdued by a lack of UK data.
At the time of writing, GBP/AUD is trading at A$1.8662, down on today’s opening levels.
Australian Dollar (AUD) Firms on High Balance of Trade
The Australian Dollar has continued to rise against the majority of its peers on account of positive domestic data combined with a fairly strong risk sentiment.
Data this morning revealed that the Australian balance of trade exceeded forecasts of a A$10.2bn surplus, instead printing at A$12.117bn. Exports jumped 5 percent month-over-month to a new top of A$45.95bn, while imports rose at a softer 3% to A$33.83bn.
The data is particularly reassuring considering recent comments from economists stressing the volatility of the exports market.
According to Andrew Hanlan, a Westpac economist, Covid shipping disruptions are a challenge for Australian exporters: falling iron ore prices also caused some concern.
BIS Oxford Economics analyst Thomas Rudgley remarked that ‘the current account balance is set to fall back, as the recent normalisation of commodity prices weigh on export revenues.’
Despite such worries, the ‘Aussie’ is performing well, bolstered by a relatively risk-on mood. As the US Dollar (USD) is depressed by ongoing employment concerns, its risk-on peers are able to attract investors’ support.
Pound (GBP) Subdued by Lack of Data
The Pound has dropped against several of its peers this morning, although it manages to cap losses on account of USD weakness. Sterling faced headwinds earlier in the week as consumer credit data fell by £0.042bn in July, rather than rising by £0.441bn as was expected.
Yesterday’s PMI data also disappointed, as the UK’s finalised manufacturing PMI confirmed a slowdown in UK factory activity. Despite being revised marginally higher, the PMI pointed to ongoing supply chain disruption and staff shortages caused by Brexit and rising coronavirus cases.
Commenting on the latest survey results, Rob Dobson, Director at IHS Markit, said:
‘Severe disruptions to supply chains and raw material shortages eroded the growth momentum of UK manufacturing in August… A wide range of factors contributed to the disruption… With all of these factors likely to persist for the foreseeable future, manufacturing could well see a further growth slowdown in the coming months.’
Not everyone lacks optimism, however. Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply observes that the manufacturing sector is still optimistic about business opportunities in the next twelve months.
Yesterday’s PMI reported rising employment for the eighth month in a row, to one of the greatest extents in the survey history.
Pound Australian Dollar Exchange Rate Forecast: AUD to Face Headwinds on Poor Data?
Looking to tomorrow, data releases for both currencies are likely to drive movement in the GBP/AUD exchange rate.
If the Australian services PMI falls on last month, as expected, the Australian Dollar could come under pressure, exacerbated by a contraction in retail sales.
Alternatively, a contraction in the UK services PMI could limit Pound gains, thus bolstering AUD. Combined with ongoing UK coronavirus and Brexit concerns, further GBP downside is likely to weigh heavily upon Sterling.