Rising Services PMI Reading could Cause Pound to Australian Dollar Gains
The Pound to Australian Dollar exchange rate (GBP/AUD) has fallen on 28th February, as Brexit-related issues once again lower confidence in the UK currency.
Looking ahead, the GBP/AUD exchange rate could appreciate when levels of UK services sector activity are announced on 5th March.
The services PMI for February, which covers areas such as tourism, financial services and retail sales, is a high-impact data release for the UK.
This is because it is the single largest contributor to national economic growth, so a positive reading reflects well on the overall economy.
With that in mind, the Pound could appreciate on 5th March if the services PMI shows growth as forecast.
Economists are only predicting a minor rise from 53 points to 53.4, but this will still be a positive development and could push the GBP/AUD exchange rate higher.
Brexit Forecast: UK-EU Clash over Irish Border could Trigger GBP/AUD Exchange Rate Decline
While the services sector reading might increase demand for the Pound, ongoing difficulties in Brexit negotiations could limit any GBP/AUD exchange rate gains.
The EU is poised to publish a draft document on the Brexit withdrawal agreement.
Analysts suspect that this will contain a recommendation to keep Northern Ireland operating under single market rules, a theory which has already caused an upset.
The UK government is committed to seeing all parts of the UK leave the EU at the same time; under EU terms Northern Ireland would be isolated from the rest of the country.
Stressing government discontent at such a proposal, a senior government official has stated;
‘The EU should be absolutely clear that the Prime Minister is not going to sign up to anything that threatens the constitutional integrity of the UK or its common market’.
If the EU seems set on dividing the UK up in this manner, the Pound could fall in value because it raises more issues to be overcome in Brexit negotiations.
Australian Dollar to Pound Exchange Rate Forecast for Turbulence on RBA Interest Rate Decision
The Australian Dollar could turn volatile against the Pound on 6th March, when the Reserve Bank of Australia (RBA) makes its interest rate decision for the month.
The RBA is currently predicted to leave interest rates untouched at 1.5%, but the tone of policymakers could still influence AUD demand.
Analysts at Credit Suisse have recently warned that the RBA is being overoptimistic with its economic forecasts, potentially to the point of harming the economy.
If the RBA’s economic outlook remains relatively unchanged after March’s policy meeting, the Australian Dollar to Pound exchange rate could drop over trader concerns.
Falling Manufacturing Activity could Cause AUD/GBP Exchange Rate Losses
More immediately than the RBA rate decision, the Australian Dollar to Pound (AUD/GBP) exchange rate could shift on the AIG manufacturing index for February.
This will be announced late on 28th February and is forecast to show a dip from 58.7 points to 57.
While this wouldn’t be a dramatic reduction in AU manufacturing levels, such a result could still lower confidence in the Australian Dollar and worsen the AUD/GBP rate.