Pound Australian Dollar (GBP/AUD) Exchange Rate Edges Higher as Services PMI Hits 3-Month High
(Updated 11:30, 16/12/2022) The Pound Australian Dollar (GBP/AUD) exchange rate is ticking up today, as investors pore over the latest PMI releases.
While manufacturing indexes point to a 31-month low, the service indexes point to a three-month high of 48.8. As such, investors hopes for a milder recession have been boosted, prompting support for Sterling.
The optimism means the Pound has recovered from this mornings lows, bringing to a narrow trading range with the Australian Dollar. At the time of writing, GBP/AUD is trading at around AU$1.8211, showing little movement from the morning’s opening rates, but a recovery of around 0.3% from the previous exchange rate shown below.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Falters as UK Retail and Manufacturing Indexes Drop
The Pound Australian Dollar (GBP/AUD) exchange rate is falling this morning, as UK private sector and retail sales stoke recession fears.
At the time of writing, GBP/AUD is trading at around AU$1.8147, a drop of roughly 0.2% from the morning’s opening rates.
Pound (GBP) Slips as Retail Sales and Manufacturing Indexes Slide
The Pound (GBP) is falling this morning, following the release of downbeat retail sales data which printed below forecast.
Retail sales for November showed a decline to -0.4, down from 0.9% in October and below a forecast of 0.3%. The sharp drop in sales is stoking recession fears among investors, prompting this morning’s falls against most major peers.
Analysts believe that today’s fall is indicative of UK retail’s future outlook. Olivia Cross, an Economist with Capital Economics, explained:
‘We expect that high inflation will drive further falls in real household disposable income of 1.1% in Q4 2022, which will keep sales volumes subdued in December.’
Further weighing on the Pound is today’s latest private sector PMI releases. Services printed a three-month high of 50, while manufacturing sunk to a 31-month low of 44.7. With the private sector indexes confirming a recession, investors are concerned about the UK’s economic outlook.
Furthermore, the continuing wave of industrial action may be pushing GBP lower. Transport workers are striking today, bringing disruption to all forms of transportation across the UK. Nurses have threatened further action too, with the UK government seemingly refusing to negotiate.
Australian Dollar (AUD) Muted as PMIs Disappoint
The Australian Dollar (AUD) is muted this morning, following the overnight release of private sector PMIs.
Both manufacturing and services index came in below forecast, with manufacturing indexes printing at 50.4 down from 51.3. Service indexes printed at 46.9 down to 47.6, while it was forecast to print at 48.
With the Australian economy slowing, analysts are focusing on the impact of the Reserve Bank of Australia’s tightening policy.
Warren Hogan, the Chief Economic Advisor at Judo Bank expanded on this. He stated:
‘The Flash PMI readings for December are still well above levels that would normally be associated with recession. What we are seeing could be the first signs of a desired soft landing for the Australian economy in 2023.’
With domestic demand beginning to slow, analysts are confident that inflation may begin to ease soon. However, the confidence isn’t filtering down to investors, who are remaining cautious around the risk-sensitive Aussie today.
Pound Australian Dollar (GBP/AUD) Forecast: RBA Meeting Minutes to Boost ‘Aussie’?
Looking ahead for the Australian Dollar, the RBA meeting minutes are due to publish next Tuesday. Should they point to further interest rate hikes, the ‘Aussie’ may strengthen as the tightening policy begins to work.
For the Pound, next Monday sees the release of the latest Confederation of British Industry (CBI) industrial trends orders figures. With further falls from -5 to -12 forecast, if the data prints as expected Sterling may weaken.