Prior to the release of the CIPS UK Services PMI the Australian Dollar (AUD) to Sterling (GBP) exchange rate stood at 1.8046 as of 09:12 GMT, fluctuating between a low of 1.8041 and a high of 1.8100.
The currency pairing had moved by -0.17% since the Monetary Policy Decision meeting held by the Reserve Bank of Australia (RBA).
Currently (09:44 GMT) the AUD to GBP stands at 1.8081 with movement of 0.03% since the release of positive UK Services PMI.
Yesterday the Pound to Australian Dollar exchange rate softened after traders reacted positively to the Australian retail sales report. The retail sales report indicated sales growth of 0.6% month on month, which is twice the forecast sales increase of 0.3%. This was due, in part, to encouraging sales figures for housing goods and clothes.
Sterling began the week softer against the ‘Aussie’ after yesterday’s release of CIPS UK Construction PMI which indicated slow growth within the sector.
The Reserve Bank of Australia released a statement today concerning their Monetary Policy Decision. The decision to hold the interest rate at 2.5%, which was forecast by all thirty-two economists surveyed by Bloomberg News, was neutrally beneficial for the GBP/AUD pairing.
The judgement to curtail interest rate growth is the RBA’s attempt to rebalance, economically, industries including residential construction and to make up for diminishing mining investment.
Daniel Martin, an economist at Capital Economics Asia Pte in Singapore confirmed the unlikelihood of a rate hike stating ‘The most prudent course is likely to be a period of stability in interest rates’.
Glenn Stevens, Governor of the Reserve Bank of Australia, parrots Martin’s sentiment; ‘Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.’
Sterling strengthens against the Australian Dollar
Having started the day in a relatively weak position, Sterling strengthened against the ‘Aussie’ post the release of the CIPS UK Services PMI.
Analysts forecasted a reading of 58.0, a small increase from the previous month of 0.3. The actual data, however, shows an increase of 0.9 (from the previous month) to 59.1. This has bolstered the Pound and balanced the GBP/AUD pairing.
The Services PMI shows acceleration in activity, a substantial increase in new business and a rise in payroll numbers. These positives helped the GBP recover from the previous weeks disappointing Manufacturing growth, or lack thereof.
This is confirmed by Chris Williamson, Chief Economist at Markit, who stated; ‘The buoyancy of the services and construction sector PMIs suggest the domestic economy clearly continued to boom in July, offsetting the cooling of growth seen in the manufacturing sector’.
The AUD/GBP pairing is likely to be affected over the coming days as several reports are due for release.
The Bank of England Asset Purchase Target is forecast to remain the same as the previous month at 375 billion Pounds. Similarly the (BoE) rate decision is due August 7, 2014 and is forecast to remain the same as the previous rate decision, leaving the benchmark interest rate at 0.50%.
On Thursday the release of Australia’s Unemployment Rate report will have a marked affect on the pairing. It is forecast to remain the same as the previous data, with the jobless rate holding at 6.0%.
Also likely to affect the pairing is the release of the nation’s Employment Change for the month of July, which is forecast to show an employment increase of 13,200, less than the 15,900 jobs gain recorded in June.