Pound Australian Dollar (GBP/AUD) Eases as UK Manufacturing Sector Contracts
The Pound Australian Dollar (GBP/AUD) exchange rate is slipping this morning after final UK manufacturing PMIs pointed to the eighth consecutive month of contracting activity.
At time of writing, the GBP/AUD exchange rate is around $1.8381, a 0.29% fall from this morning’s opening levels.
Pound (GBP) Undermined by Subdued Market Demand
The Pound (GBP) came under immediate pressure to kick the week off as final manufacturing PMI highlighted a waning factory sector. Against a preliminary estimate of 48.0, the final reading showed a 47.9, down from February’s seven-month high of 49.3.
The eighth straight month of contraction in manufacturing highlights the flagging sector, with output falling amid subdued market demand. However, new business rose modestly with the first gain in ten months. Also providing a silver lining was business confidence improved to a 13-month high. Dr John Glen, Chief Economist at the Chartered Institute of Procurement & Supply, commented on the data:
‘March was a month of two halves where supplier delivery times saw the biggest improvement for three decades but the continued weakness overall in new order levels, dragged manufacturers further back into the abyss of contraction.’
Australian Dollar (AUD) Under Pressure from Faltering Chinese Manufacturing Sector
Meanwhile, the Australian Dollar (AUD) is clinging onto modest gains despite downbeat data from the world’s second largest economy. The latest manufacturing PMI for China showed a slide to 50 from 51.6 in February.
The disappointing score shows only a modest recovery from the easing Covid restrictions in China. The score came in far below expectations and only a touch above contraction territory. China’s economy showed modest signs of recovery in the first two months of 2022, lending support to a robust recovery. Capital Economics commented on the latest survey:
‘The relatively modest and short-lived pick-up in the manufacturing PMIs in the first quarter suggests that the industrial sector has only received a limited boost from reopening.
‘This is partly due to a weaker global backdrop, but it is also consistent with our view that most of the reopening recovery will come from the services sector which was hardest hit by the zero-COVID policy.’
Pound Australian Dollar Exchange Rate Forecast: RBA Interest Rate Decision to Sink the Aussie?
Looking ahead, the Pound Australian Dollar exchange rate could see further movement with the interest rate decision from the Reserve Bank of Australia (RBA). Expectations are growing for a pause from the central bank, which could see the Australia Dollar slide.
Meanwhile, a relatively quiet week for data could see the Pound trade on market sentiment. The Bank of England will release its financial policy summary and record tomorrow. Any hints on monetary policy could influence the pairing, a hawkish rhetoric could boost Sterling.