Pound Sterling Australian
Dollar (GBP/AUD) Exchange Rate Muted as Manufacturing Output Plummets to
Seven-and-a-Half Year Low
The Pound
Sterling Australian Dollar (GBP/AUD) exchange rate was left flat after
disappointing PMI data. The pairing was left trading at around AU$1.9411.
Sterling
outperformed other major currencies after Prime Minister Boris Johnson was able
to secure his party an 80-seat majority in the general election.
Despite the
Conservatives’ win last week, Sterling sentiment was left dampened following
the release of weak UK flash PMI data.
According to
data, British businesses suffered the worst downturn since mid-2016 in the
run-up to the general election.
Added to this, the flash data suggested the world’s fifth-largest economy was on course to contract in the final quarter of the year.
Commenting on
the PMI data, Group Director at the Chartered Institute of Procurement and
Supply, Duncan Brock said:
‘However
the biggest shock came in the form of the worst output performance from the
manufacturing sector since July 2012. A lack of new orders and the unravelling
of pre-Brexit inventories hampered progress and supply chain managers’
purchasing dropped at the fastest pace since 2009 in the absence of a pipeline
of work ready and waiting. Service companies had challenges of their own in the
form of another modest rise in costs for food and fuel.’
Lack of US-China Trade
Deal Details Leaves the Australian Dollar (AUD) Flat
The risk-sensitive Australian Dollar was left flat on Monday as traders became frustrated over a lack of US-China trade deal details.
While the ‘Aussie’
benefitted earlier from cooled tensions between the two powers, gains were
limited on Monday.
On Sunday, US
Trade Representative Robert Lighthizer revealed the ‘phase one’ deal between
Washington and Beijing is ‘totally done’.
After more
than two-and-a-half years of tensions between the US and China, the United
States is set to reduce some tariffs on Chinese goods while China will increase
the purchases of American agricultural, energy and manufactured products.
AUD was left flat despite the increased risk appetite following the announcement and commenting on this, Rabobank’s senior currency strategist, Jane Foley said:
‘While
there is significant relief over the trade deal, a lot of that would have been
in the price already, so now there is a chance that trade relations could be
strained again and we know a second phase of the trade agreement will be
difficult.’
Added to
this, an anonymous source familiar with negotiations noted:
‘[The deal]
is a phased achievement, and does not mean that the trade dispute is settled
once and for all.’
Pound Australian Dollar
Outlook: Weak UK Wage Growth to Weigh on GBP
Looking ahead
to Tuesday, the Pound (GBP) could slump against the Australian Dollar (AUD)
following UK employment and wage growth data.
If average
earnings growth slips to a six-month low and unemployment rises, Sterling sentiment
will slump.
Meanwhile, further
details of the ‘phase one’ trade deal between the US and China could buoy the ‘Aussie’.
If a date
for the deal to be signed is announced, risk appetite will rise and the Pound Australian
Dollar (GBP/AUD) exchange rate will slide.
