Pound Australian dollar (GBP/AUD) rebounds following UK PMIs

Pound Australian dollar (GBP/AUD) exchange rate plummets amid risk-on flows

(Updated 15:45, 23/04/22) The pound Australian dollar (GBP/AUD) exchange rate maintained its upside as the session progressed, amid a data-light afternoon.

After initially strengthening against the Australian dollar (AUD), the pound (GBP) has extended this morning’s gains, as a spell of risk averse trade undermined the acutely risk-sensitive ‘Aussie’.

GBP neared the end of Tuesday’s session on a high note, firming against most of its major rivals as Bank of England (BoE) Chief Economist Huw Pill followed the UK’s upbeat PMI data with some unexpectedly hawkish commentary.

Speaking at the London campus of the University of Chicago Booth School of Business, Pill stated:

‘The combination of little news and the passage of time have brought a Bank Rate cut somewhat closer. But the same lack of news gives me no reason to depart from the baseline that I already established, the time for cutting Bank Rate remained some way off.’

Deviating from his peer’s recently dovish rhetoric, Pill’s commentary lifted Sterling amid suggestion that the central bank may continue to defer monetary loosening.

At the time of writing, GBP/AUD  is trading at AU$1.9196, marginally up from AU$1.9194 this morning.

The focus moving forward will be the latest AU inflation report, due for release overnight.

With core inflation forecast to have cooled to 3.4% in the first quarter of 2024, could ramped up Reserve Bank of Australia (RBA) interest rate cut speculations dent AUD exchange rates?

Original article continues below:

Pound Australian dollar exchange rate lifted by UK PMIs

The Pound Australian dollar (GBP/AUD) exchange rate is rebounding from recent lows this morning following the UK’s latest preliminary purchasing managers indexes (PMI).

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9194, up approximately 0.3% from this morning’s opening rate.

Pound (GBP) strengthens on mixed PMIs

The pound (GBP) is gaining ground against its rivals this morning following the release of Britain’s latest preliminary PMIs.

The UK’s vital services sector surprised to the upside, with the index printing at 54.1 in April, up from the previous month’s 53 and beating forecasts of 53.1.

However, despite an upward revision to the UK’s manufacturing PMI last month, the manufacturing index unexpectedly fell to 48.8 in April. Markets had anticipated a second consecutive month of growth, but the data instead showed a return to contraction within the UK’s manufacturing sector.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that the data indicates a quarterly growth pace of 0.4%, indicating that the UK economy has turned a corner since dipping into a technical recession last year.

Williamson stated:

‘Early PMI survey data for April indicate that the UK economy’s recovery from recession last year continued to gain momentum.’

Australian dollar (AUD) muted amid slumping commodities

The Australian dollar is largely subdued this morning despite a stronger-than-forecast set of PMIs overnight.

The ‘Aussie’ strengthened during Asian trading hours, with business activity expanding at the fastest pace in twenty-four months.

According to preliminary data from S&P Global, the country’s manufacturing PMI jumped to 49.9 in April, surpassing expectations of 47.9 and rising from March’s 47.3. Just shy of breaking out of contraction territory, the better-than-expected reading saw AUD garner some investor support.

Meanwhile, Australia’s services PMI fell slightly from March’s 54.4 to 54.2, indicating a marginal slowing of activity. However, with the index printing firmly in expansion territory, AUD was able to attract some interest.

Entering into European trading hours AUD’s gains then levelled off. The commodity-linked ‘Aussie’ relinquished its overnight gains with coal prices down 2.65%, at the time of writing. As one of Australia’s main exports, slumping coal prices appear to be limiting AUD’s upside potential.

Pound Australian dollar exchange rate forecast: BoE speech to sink GBP?

Coming up, a speech from Bank of England Chief Economist Huw Pill could drive GBP movement this afternoon. Coming off the back of Governor Andrew Bailey and Deputy Governor Dave Ramsden’s dovish assertions last week, any further signals that the central bank is preparing for monetary loosening in the summer months could sink Sterling against its major peers.

For the ‘Aussie’, the latest domestic inflation data is due for release overnight. Economists expect that Australian inflation will have eased to 3.4% in the first quarter of 2024, cooling notably from 4.1% in the previous quarter.

Should the data print as forecast, dialled up Reserve Bank of Australia interest rate cut bets could dent AUD exchange rates.

In the meantime, ongoing market response to geopolitical developments in the Middle East could drive the pound Australian dollar exchange rate. Further upbeat trade may see the highly risk-sensitive ‘Aussie’ take precedent over its safer rivals once again.

Yasmine Arasteh

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