Pound Australian Dollar Exchange Rate Rises as UK Factory PMI Hits Decade-High

April 1, 2021 – Written by John Cameron

GBP/AUD Exchange Rate Edges Higher on Upbeat UK PMI Data

The Pound Australian Dollar (GBP/AUD) exchange rate rose by 0.2% today after the UK’s factory PMI surged and hit a decade-high of 58.9 in March. The pairing is currently fluctuating around AU$ 1.82.

Analysts at Markit commented on the report:

‘Business sentiment was at its most elevated for seven years, hitting unsurpassed levels at both consumer and investment goods producers.

‘Almost two-thirds of manufacturers expect output to rise over the coming year (only 6% expect a contraction). Jobs growth was also at a seven-year high, supported by the sharpest rise in backlogs of work for 11 years.’

Consequently, UK market optimism has improved now that the nation heads towards further easing of lockdown measures this month.

UK Covid-19 infection rates also continue to fall, while hospitalisations are down by over a thousand compared to last week.

The Pound Australian Dollar exchange rate has suffered some losses, however, as growing numbers of Covid-19 infections in Europe are a cause for growing concern for the UK, which could be similarly affected in the weeks or months ahead.

Australian Dollar (AUD) Exchange Rate Suffers from Risk-Off Trade

The risk-sensitive Australian Dollar has also suffered from the news that there’s a growing Covid-19 crisis in Europe, with France now heading into a month-long lockdown to curb the spread of the virus.

Australia’s latest retail sales figure for February also left Australian markets dismayed, with the figure falling by -0.8%, slightly above forecasts.

Analysts at Westpac argued:

‘The final Feb release will include more granular detail that is likely to highlight the impact of ‘mini-lockdowns’ during the month in [Victoria] and [Western Australia] – sales up marginally across other states.’

Today also saw the release of the latest Australian Trade Balance report for February, which fell below forecasts to 7,529 million, leaving some AUD investors concerned for the outlook of the nation’s economy.

However, risk-off trade is limiting the appeal of the risk-sensitive ‘Aussie’ today, but with the outlook improving for the US economy – the largest in the world – we could see risk sentiment steadily improve. If so, then the AUD/GBP exchange rate could begin to claw back some of its losses.

GBP/AUD Exchange Rate Forecast: Could Falling UK Covid-19 Cases Further Boost Sterling This Week?

The Australian Dollar (AUD) will remain sensitive to global risk sentiment this week, with any further signs of rising Covid-19 cases in Europe – or further, more stringent lockdown measures on the continent – dampening demand for the risk-correlated currency.

The Pound Australian Dollar (GBP/AUD) exchange rate will likely continue to head higher, however, as UK Covid-19 cases continue to fall and, as a result, is adding to growing confidence in the nation’s economy.

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