Pound Australian dollar (GBP/AUD) wobbles despite UK services growth
The Pound Australian dollar (GBP/AUD) exchange rate is rangebound this morning despite a stronger-than-expected UK services PMI.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9556, virtually unchanged from this morning’s opening rate.
Pound (GBP) buoyed by services uptick
The increasingly risk-sensitive pound (GBP) is largely rangebound this morning as a gloomy market mood offset’s a better-than-expected UK services PMI.
The finalised services index in the UK surpassed market projections of 53.3, rising to 53.7 in August, and rising to its highest level since May.
Tim Moore, Economics Director at S&P Global Market Intelligence, said:
‘August data highlighted a recovery in UK service sector performance as improving economic conditions and domestic political stability helped to bolster customer demand. New business again increased at a robust pace after a lull in decision-making earlier this summer. This fuelled the fastest upturn in service sector activity since April and extended the current period of growth to ten months.’
While the data signals an increased momentum in UK private sector activity within the vital services sector, GBP struggles to garner investor interest as a risk-off market mood sees investors favouring it safer rivals.
Australian dollar (AUD) pressured by slower-than-forecast growth
The Australian dollar is struggling to edge higher this morning following the latest Australian GDP data.
The Australian economy grew by 0.2% in the second quarter, holding steady for a third consecutive quarter though missing market projections of a larger 0.3% expansion.
While, government spending rose, overall investment ticked lower by 0.1% through the second quarter of the year.
Katheran Keenan, head of national accounts at ABS commented:
‘Spending on many discretionary categories fell in the June quarter. This followed a relatively strong result in the March quarter, which included a number of sporting, gambling and music events.
The strongest detractor from growth was transport services, particularly reduced air travel. This was the first fall for this series since the September 2021 quarter.’
Could decelerating economic growth serve to dampen hopes of further interest rate cuts by the Reserve Bank of Australia (RBA) in the coming months, thereby sapping appeal for the ‘Aussie’?
Elsewhere, a deteriorating market sentiment weighed on the risk-sensitive Australian dollar, further undermining AUD exchange rates this morning.
Pound Australian dollar exchange rate forecast: RBA speech in focus
Looking ahead, Australia’s latest trade data is due for release tomorrow. Signs of weakening output could weigh on the export-heavy economy overnight.
Additionally, a speech by RBA Governor Michelle Bullock could infuse AUD exchange rates with volatility. While markets remain hopeful of further monetary tightening by the Australian central bank, any hawkish signals by Bullock could see AUD surge against its peers.
Looking to the UK, a lack of high-impact UK data may leave the pound vulnerable to global risk dynamics, with an improving market sentiment likely to lift GBP against its safer peers.