Disappointing Australian Construction Prompts GBP AUD Exchange Rate Surge

January 8, 2018 - Written by John Cameron

STORY LINK Disappointing Australian Construction Prompts GBP AUD Exchange Rate Surge

Pound Australian Dollar (GBP AUD) Exchange Rate Climbs on Poor AIG construction Print

The Pound took the lead against the Australian Dollar (AUD) on Monday, bolstered by news that the construction sector in Australia expanded at a lower rate than expected.

The AIG/housing industry association’s Australian performance of construction reading dropped to 52.8 in December, down from November’s 57.5 and marking the slowest rate of expansion in eight months.

This resulted predominantly from a contraction in new orders, as well as smaller leaps in employment, capacity utilisation and deliveries.

Despite the deceleration any figure above 50 represents growth, hence the reaction from some economists has been positive.

Peter Burn, Ai Group Head of Policy, shared his optimistic outlook on the readings:

‘There are suggestions of an easing in conditions – Dec saw a pull-back in activity growth and a modest decline in new order. Looking at 2017 as a whole, even with the steady retreat in apartment building, construction activity was robust through the year. While the pace of growth may well ease, continued healthy levels of work across the industry look set to see a solid start to 2018’.

Nonetheless, this slow-down did hurt demand for the Australian Dollar, effectively allowing Sterling to capitalise.

GBP Exchange Rates Capitalise on Upbeat UK Manufacturing Outlook

A polled majority of companies expect global demand and growth in export markets to increase for British manufacturers in 2018.

According to a survey by the EFF and AIG, 40% of companies questioned expect growth in 2018, whilst only 19% expect a downturn in their businesses.

This is due to manufacturers expecting strong growth in various key export markets, growth that will hopefully sustain order books.

Chief Executive at EEF Stephen Phipson shared his optimism on the readings, stating:

‘Manufacturers left 2017 in an upbeat mood and are set to outpace the rest of the economy again this year as the growth in global trade continues to gain momentum’.

He also stressed that Brexit uncertainty will continue to cause problems, however, with the investment outlook ‘on a knife edge’.

Nonetheless, this upbeat manufacturing outlook proved successful in bolstering the Pound against the Australian Dollar (GBP AUD).

GBP AUD Exchange Rate Forecast: Volatility Likely on Australian Commodities and UK GDP

The Pound Australian Dollar exchange rate could shift towards volatility as the week progresses depending on the outcome of looming NIESR UK gross domestic product estimates for Q4 2017.

UK GDP is currently forecast to have grown relatively steady at 0.5% over the past three months, a forecast that would point towards ongoing resilience in the face of Brexit negotiation tribulations.

If a drop were to occur, however, then optimism would be promptly squashed.

Looking ahead for AUD, markets are somewhat apprehensive that cooling commodity demand from China might hurt the Australian economy - with their largest trading partner continuing to attempt to cut down on pollution through the disuse of fuels like coal.

On the data front, Tuesday will see Australian building approval figures and Thursday; the ‘Aussie’ retail sales.

Another significant mover, however, will be the performance of the US Dollar (USD) which is currently clawing back some losses.

If the US Dollar extends its gains then risk appetite will likely decrease, further curbing the Australian Dollar’s potential.

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TAGS: Australian Dollar Forecasts Currency Predictions