The pound versus the Australian dollar is rallying this morning after the UK services PMI entered growth territory.
At the time of writing, the GBP / AUD pair is trading at around 1.8122 Australian dollars.
Australian dollar (AUD) falls despite positive Australian PMI data
The Australian dollar is grappling with the pound this morning despite a positive service PMI in Australia.
The seasonally adjusted PMI rose to 55.5 in March, signaling continued strong growth in activity. The last reading extended the current expansion sequence to seven months.
Osama Bhatti, economist at IHS Markit, commented on PMI’s latest statement:
“The March PMI data indicated continued growth in business activity in the Australian services sector during the first quarter of 2021. Both business activity and new business saw further dramatic expansion in March, with firms noting that the continued easing of COVID-19 restrictions has accelerated customer confidence in many areas of the service economy. ”
However, the recovery in the US dollar pushed the Australian dollar down against many of its peers as US Treasury yields stabilized ahead of the Federal Open Market Committee (FOMC) and investors look for a hint of Fed forecasts and take on inflation.
Pound (GBP) Supported by Rising UK Services PMI
The pound gained support against the Australian dollar this morning following the release of the latest UK Services PMI.
PMI almost fell short of forecasts, but reported a strong rebound to 56.3, rising sharply from 49.5 in February.
The Business Activity Index (PMI) once again showed confidence in business optimism, according to IHS Markit:
“The March data points to an improvement in business expectations for the fifth month in a row. The optimism about growth prospects for the coming year was overwhelmingly linked to a roadmap for looser pandemic restrictions and confidence in the prospects for recovery from the successful introduction of the vaccine in the UK. ”
Tim Moore, director of economics at IHS Markit, commented on the growth in the sector:
“UK service providers returned to expansion mode in March, as confidence in a roadmap to ease lockdown restrictions provided a significant boost in new orders. Overall business activity grew at the fastest pace since August 2020, and this return to growth marked the end of a four-month sequence of downturns. ”
What’s more, despite new concerns about the safety of the AstraZeneca vaccine, the first Moderna shots in the UK were given this morning, adding to the list of vaccines currently in use in the UK.
READ: GBPAUD: Pound Sterling Against Aussie As RBA Holds Interest Rate At 0.1%
GBP / AUD exchange rate forecast
Pound investors are expected to release the latest UK Construction PMI tomorrow, which is forecast to show a moderate 1 point gain. If PMI surpasses forecasts, the pound may start to rise.
For Australian dollar traders, the Australia Performance Services index is expected to jump to 57 points tomorrow, further underscoring the effectiveness of fiscal and monetary policy measures to restore the country’s economy, which could push the Australian dollar higher.
The Australian dollar (GBP / AUD) exchange rate will continue to be driven by global sentiment, with a sharper recovery in the US dollar putting additional pressure on the Australian dollar.