The Pound Australian Dollar (GBP/AUD) exchange rate has weakened this morning on the back of the latest UK services PMI.
At the time of writing the GBP/AUD pairing are trending around the AU$1.8612 level as the risk-correlated ‘Aussie’ is bolstered by a more upbeat global market mood.
Pound (GBP) Weakens on back of fall in UK Services PMI Data
The Pound has found itself weakening against many of its major rivals this morning following on from the release of the most recent UK services PMI.
The services PMI for August came in at 55, falling from 59.6 the month previous as concerns creep in regarding the UK’s economic recovery from coronavirus.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, commented on the latest PMI figures:
‘The third consecutive monthly fall in growth in the services sector showed that a lack of staff and raw materials in August continued to rein back on recovery, after the spring surge. Service businesses were particularly hit by lockdowns and the loss of workforces, so it was no surprise that the opening of the UK economy led to the fastest levels of job creation in the sector since July 1996.’
‘Job seekers had the pick of the crop in terms of opportunities, but employers had to offer higher wages and more benefits to relieve the restrictions in operating capacity leading to another rapid rise in business costs. This in turn resulted in higher prices to customers and it’s difficult to say how long supply imbalances in the economy will persist.’
Australian Dollar (AUD) Supported by Upbeat Market Mood
The Australian Dollar has remained broadly appealing this morning despite disappointing PMI and retail sales data from Australia.
Instead, the ‘Aussie’ has found itself supported on the back of a more upbeat market mood paired with a pullback in the US Dollar.
The Australian services PMI continued to shrink during August owing to the ongoing coronavirus situation across the country.
Jingyi Pan, Economics Associate Director at IHS Markit, commented on the latest PMI figures, saying:
‘The latest indications from the IHS Markit Australia Services PMI pointed to service sector output further contracting from July with the COVID-19 conditions yet to turn a corner. Job shedding notably returned for private sector service providers after nine months of growth according to the survey.’
‘Further weighing on business activity had been the persistent price pressures, made worse by the COVID-19 mobility restrictions which led to shipping delays and shortages. Looking on the bright side, however, firms were slightly more optimistic and hopeful for an eventual recovery in August compared to the prior month.’
Pound Australian Dollar Exchange Rate Outlook: RBA Interest Rate Decision in Focus
Heading into next week, all eyes will be on the latest interest rate decision from the Reserve Bank of Australia on Tuesday.
Whilst no policy changes are expected from the bank, investors will instead keep an eye on the tone policy makers choose to take.
Monday’s UK construction PMI could drive movement in GBP exchange rates at the start of the week.