Pound Australian Dollar Exchange Rate Softens on Poor UK PMI Data
The Pound Australian Dollar (GBP/AUD) exchange rate plunges on worse-than-expected UK PMI data as the services sector contracts.
At time of writing the GBP/AUD exchange rate is trading around $1.9693, a 0.64% plunge from this morning’s opening levels.
Pound (GBP) Weakens amid Downbeat PMIs
The Pound (GBP) plummeted against its peers this morning in the wake of worse-than-expected PMI data.
The preliminary manufacturing and services PMI estimates for the UK revealed that business activity unexpectedly shrank in August. A duel drop in demand has raised the recession risk, and Sterling is once again under increased pressure.
Against expectations of a slip to 45, the manufacturing sector dropped to 42.5, the lowest reading since 2020. It also marked the 13th consecutive decline in the sector. More concerning, however, is the crucial service sector that dropped into contraction territory for the first time since January. Services PMI declined to 48.7, down from 51.5 last month and missing expectations of 51.
Commenting on the latest dire figures, Chris Williamson, Chief Business Economist at S&P Global, said:
‘A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival. The survey is indicative of GDP declining by 0.2% over the third quarter so far.”
‘While a further hike in interest rates in September looks to be on the cards, the August PMI data will add to speculation that rates could soon peak.’
Australian Dollar (AUD) Undermined by Poor Data
Meanwhile, the Australian Dollar (AUD) also came under pressure from worse-than-expected PMI data. However, the more troubling UK economy kept the ‘Aussie’ supported against the flagging Pound.
Both manufacturing and services PMIs registered poor outcomes as both printed worse than expected. The service sector was expected to marginally improve from the previous month, albeit remaining in contraction territory. Fears are now resurfacing that the Australian economy is slowing. Warren Hogan, Chief Economic Adviser at Judo Bank, commented:
‘We have now seen two consecutive months of sub-50 readings on these critical activity indexes confirming the slowdown in economic growth has continued right through the winter months.
‘There is the possibility that chronic labour shortages and skills mismatches are keeping the demand for labour elevated despite the cyclical slowdown in the economy.’
Pound Australian Dollar Forecast: Sterling to Plunge Further on Downbeat Market?
Looking ahead, the Pound Australian Dollar exchange rate could see further slides as the market continues to digest the morning’s PMI data. With the UK’s mounting economic woes, the latest figures won’t help the situation and could slump further.
Meanwhile, the Australian Dollar could also come under increased pressure as PMIs around the world disappoint. Further evidence of global growth slowdown could weigh on risk sentiment, and the ‘Aussie’ could slide.