Pound Australian Dollar exchange rate rangebound amid renewed economic optimism
The Pound Australian Dollar (GBP/AUD) exchange rate is trading without a clear direction this morning despite signs of increasing Australian business confidence.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9311, virtually unchanged from this morning’s opening rate.
Australian Dollar (AUD) buoyed by business confidence
The Australian Dollar (AUD) rebounded overnight, as the latest NAB business confidence indicator beat expectations amid a cheery spell of trade.
Business confidence increased in December to -1, up from November’s -8 and beating forecasts of -7. While today’s data marked a third consecutive month of negative readings, the surprise uptick provided the softest of recent contractions. The boost came from increased activity in the retail and mining sectors, serving to uplift ‘Aussie’ sentiment amid signs of increased business optimism.
However, as price pressures ease, speculation of dovish monetary policy from the Reserve Bank of Australia may serve to dampen investor interest in AUD as today’s session continues.
Alan Oster, Chief Economist at the NAB, commented:
‘The sales periods around Black Friday and Christmas likely have played a role here but this is nonetheless an encouraging sign that inflation may have eased at the end of the quarter.’
As markets continue to digest last night’s data, the risk-sensitive Australian Dollar may stay afloat amid a cautiously upbeat spell of trade.
Pound (GBP) supported by UK optimism
The Pound (GBP) is trading without a clear direction this morning amid a lack of notable UK data.
However, despite concerns of a bleak end to 2023, economists have offered renewed optimism surrounding the trajectory of the UK’s economy.
Reports of falling UK government debt this morning, are serving to keep GBP afloat, as hopes of spring tax cuts cushion Sterling’s downside.
Laura Trott, Chief Secretary to the Treasury, affirmed that things are beginning to look up for the UK economy, stating:
‘Debt is on track to fall as a share of the economy. And we have been able to afford tax cuts for 27mn working people, and an £11bn tax cut to drive business investment.’
Pound Australian Dollar exchange rate forecast: PMIs to drive volatility?
Australia’s latest PMI data is due for release tonight, with a minor uptick forecast in both the services and manufacturing sector. However, with manufacturing set to hit 48.4 and services forecast at 48, both estimates lie firmly in contraction territory, which would place Australia’s latest composite PMI estimate below 50 for a ninth consecutive month.
The latest PMI estimates are due out in the UK on Wednesday. Preliminary figures are forecast to show minor decline in the services sector, falling to 53.2 in January, down from December’s 53.4. While remaining in expansion territory, the index may lightly pressure Sterling amid signs that economic expansion in the vital services sector is slowing.
The manufacturing industry’s index is set to report a preliminary figure of 46.7 in January, contracting at a slower pace than in December, when growth was at 46.2. Ultimately however, these lacklustre readings may serve to sour Sterling sentiment.
In the meantime, the Pound Australian Dollar exchange rate remains vulnerable to changes in market mood. Should cheery trade permeate global markets, the risk-sensitive ‘Aussie’ may edge higher. However, a spell of gloomy trade could see the Pound take precedent.