Pound Australian dollar (GBP/AUD) slumps to four-month low amid disappointing US data
(Updated 16:30, 03/05/24) The Pound Australian dollar (GBP/AUD) exchange rate plunged to a fresh four-month low during this afternoon’s session as significant US data releases infused volatility into markets.
Both US non-farm payrolls data and the latest unemployment rate came in below market expectations, which in turn saw investors speculate on current Federal Reserve interest rate cut bets, sparking a risk-on mood.
As such, the acutely risk-sensitive Australian dollar (AUD) strengthened against the pound (GBP) and the majority of its peers, bolstered by this afternoon’s shift in risk-appetite.
At the time of writing, GBP/AUD is trading at around $1.8986, down roughly 0.6% from today’s opening levels.
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Pound Australian dollar (GBP/AUD) exchange rate flat despite upbeat PMIs
The pound Australian dollar (GBP/AUD) exchange rate is trading sideways this morning following the release of the latest UK and Australian services PMIs.
At the time of writing the GBP/AUD exchange rate is trading at $1.9083, virtually unchanged from this morning’s opening rate.
Pound (GBP) underpinned by better-than-expected UK PMI
The pound (GBP) is trading in a narrow range against the majority of its peers this morning despite some forecast beating economic data.
The UK’s finalised services PMI came in better-than-expected, and rose from 53.1 to 55.0 in April, surpassing a preliminary reading of 54.9.
The data confirmed a sixth consecutive month of growth and marked the greatest improvement in activity in almost 12 months.
Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey explained:
‘Service providers benefited from improving business and consumer spending in April as more favourable demand conditions underpinned the greatest improvement in activity since May 2023. The latest survey results are consistent with the UK economy growing at a quarterly rate of 0.4% and therefore pulling further out of last year’s shallow recession.’
However, despite the upbeat PMI reading, the pound is mostly rangebound against its peers so far this morning.
Australian Dollar (AUD) holds steady following services PMI
The Australian dollar (AUD) is managing to stay afloat against the majority of its peers this morning following the release of Australia’s finalised services PMI for April.
Although the index printed marginally below the preliminary estimate, coming in at 53.6 rather than 54.2, it still printed well above the 50 level that marks expansion, and confirmed an ongoing rebound in service sector activity.
Matthew De Pasquale, Economist at Judo Bank said:
‘The Australian Composite PMI for April confirms earlier ‘Flash’ PMI findings of an ongoing rebound in activity levels, continued employment growth, and improved business confidence.’
However, capping AUD’s potential upside this morning is a mixed market mood. As an acutely risk-sensitive currency, the ‘Aussie’ is being undermined by this morning’s fluctuation in risk-appetite.
GBP/AUD exchange rate forecast: interest rate decisions in the spotlight
Looking ahead, the primary catalyst of movement for the pound Australian dollar exchange rate moving into next week will undoubtedly be the Reserve Bank of Australia’s (RBA) and the Bank of England’s (BoE) upcoming interest rate decisions.
Scheduled for release on Tuesday and Thursday respectively, both central banks are widely expected to keep interest rates on hold.
As such, investors will look ahead to the accompanying forward guidance and press releases for any hints surrounding the future of monetary policy.
As markets are currently pricing in the first BoE rate cut to arrive in September, any dovish commentary from policymakers could see markets reprice their current bets, and in turn dent Sterling sentiment.
Similarly to the BoE, markets are also pricing the first RBA interest rate cut to be delivered in September. Could any hawkish remarks push rate cut bets further afield and underpin AUD exchange rates in the process?