Pound Australian Dollar (GBP/AUD) exchange rate flat despite easing UK economic concerns

Pound Australian Dollar (GBP/AUD) exchange rate narrows despite robust UK services PMI

The Pound Australian Dollar (GBP/AUD) exchange rate is rangebound this morning, as both currencies enjoy robust PMI readings.

At the time of writing, GBP/AUD is trading at around AU$1.9260, showing little movement from the morning’s opening levels.

Pound (GBP) ticks upward amid easing economic decline

The Pound (GBP) is wavering higher this morning, following the release of the latest preliminary PMI readings.

In February, the manufacturing sector improved somewhat, while the vital UK service sector remained at 54.3. This showed that the sector remained in growth on a monthly basis.

Furthermore, analysis revealed that the indexes showed signs of improving economic activity. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented:

‘UK economic growth has accelerated in February, with the early PMI survey data pointing to the largest rise in business activity for nine months. This is by no means a one-off improvement, as faster growth has now been recorded for four straight months after a brief spell of decline late last year.’

Furthermore, the Pound is enjoying additional support against safer assets, amid the morning’s upbeat trade. As an increasingly risk-sensitive currency, GBP is able to catch bids as investors eye riskier assets.

Australian Dollar (AUD) supported by upbeat services PMI

The Australian Dollar (AUD) is firming this morning, following a forecast-beating services PMI. In February, the key sector grew significantly more than expected.

While markets had anticipated a return to growth, the figure printed at 52.8, making a clear return to expansion.

Warren Hogan, Chief Economic Advisor at Judo Bank, commented:

‘Both key activity indicators have experienced a sharp improvement over the first two months of 2024. The composite output index is now above the neutral 50.0 index level for the first time since September 2023, and is at its highest reading since April last year.’

Furthermore, amid staunch expansion across AI firms, the market mood is cheery this morning. As the ‘Aussie’ is an especially risk sensitive currency, the bullish mood is yielding additional support.

Additionally, the latest FOMC meeting minutes rang more dovish than expected, further lifting the market mood.

Pound Australian Dollar exchange rate forecast: UK consumer confidence in focus

Looking ahead for the Pound, the main driver of movement is likely to be lower tier data, such as the latest GfK consumer confidence index.

In February, confidence is forecast to have increased slightly on a monthly basis, but is expected to remain deeply negative. As such, the Pound may struggle to attract support from investors if consumers remain pessimistic.

For the Australian Dollar, data releases are few and far between through to the end of the week. Because of this, the ‘Aussie’ may trade within narrow boundaries over the course of Friday’s session.

Elsewhere, risk appetite is likely to play a role in shaping the exchange rate. Due to both currencies being risk sensitive, bullish trade could benefit both sides of the pairing.

John Mulcahey

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