GBP/AUD Exchange Rate Bounces Higher as Australian Growth Slows

A number of factors led to the Pound Sterling to Australian Dollar advancing on Wednesday. The pairing was able to climb by 0.7% over the course of trading as data from Australia caused concern and a services report from the UK renewed confidence in the nation’s economic recovery. The Australian Dollar fell against almost all of its most traded currency counterparts following the release of services data from China, Australia’s largest trading partner. The services data saw HSBC economist Hongbin Qu assert; ‘The headline HSBC China Services PMI improved slightly to 53.0 in November, up from 52.9 in October. New business improved while outstanding business contracted further. The labour market index moderated and price pressures remain subdued. The service sector saw a very marginal improvement in November, alongside sluggish activity in the manufacturing sector. We expect the PBoC's recent rate cuts will help stabilize demand in the near term. However, downside pressures on the economy still persist and warrant further monetary and fiscal easing measures in the coming months.’ China’s HSBC Composite PMI eased from 51.7 in October to 51.1 in November, indicating that growth the weakest for six months.

The Australian Dollar failed to derive any support from the domestic AiG Performance of Service Index, which edged up ever so slightly from 43.6 to 43.8. The bulk of the Australian Dollar’s losses were sustained as a result of Australia’s Gross Domestic Product data for the third quarter. The expansion of 0.3% was less than half the 0.7% anticipated. As well as falling against the Pound, the Australian Dollar fell to around a four-year low against the US Dollar. Further GBP/AUD losses were sustained after the UK’s Services PMI was shown to have risen by more-than-expected. The UK report saw David Noble of the Chartered Institute of Procurement & Supply assert; ‘Where other sectors have succumbed to a minor slowdown, services is leading the way confidently, with investments and marketing activity supporting improving productivity. Though suppliers are under some pressure with capacity constraints, these have resulted in a rise in employment levels to tackle backlogs alongside incoming new business. Higher staff costs are being tempered by lower fuel costs, keeping inflation low as competition and good procurement keeps output prices down. Half of the survey’s respondents reported optimism for the sector as activity expanded for the twenty third consecutive month, which is a good sign for the end of this year and the beginning of 2015.’

Overnight the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate could experience movement as a result of Australia’s retail sales and trade balance figures. Investors will also be looking ahead to tomorrow and the Bank of England’s interest rate announcement. The central bank is largely expected to leave interest rates unchanged.