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US Interest Rate Hike Optimism Pushes Australian Dollar to Pound (AUD/GBP) Exchange Rate Down

Pound Sterling Exchange Rates

Australian Dollar to Pound Exchange Rate (AUD/GBP) Forecast to Struggle on Continued US Economic Optimism

Growing expectations of four US interest rate hikes this year have weakened the Australian Dollar today, leading to a minor decline against the Pound.

Following testimony by Federal Reserve Chair Jerome Powell, it has been concluded that there could be more US rate hikes this year than first thought.

Such sentiment has boosted US Dollar demand, which by extension has lowered confidence in currencies like the Australian Dollar which are considered a higher risk.

Australian domestic data has also contributed to the recent AUG/GBP exchange rate decline, with manufacturing activity reported to have slowed in February.

The December to January reading showed growth in the sector, so the latest data represents a step back when it comes to Australian factory output.

Slowing UK Manufacturing Activity Keeps Pound to Australian Dollar Exchange Rate Flat

The Pound has traded in a narrow range against the Australian Dollar today, as traders process the news that UK manufacturing activity has slowed.

The reading for February showed a minor decline, although in the bigger picture the drop from 55.3 points to 55.2 was still the lowest level of activity in eight months.

Giving a balanced estimation of the future performance of the UK manufacturing sector, Duncan Brock of the Chartered Institute of Procurement and Supply said;

‘Manufacturing activity crawled at a snail’s pace not seen for almost a year.

[However], the biggest news in February was that despite the limited output, employment levels rose at the second fastest rate since the middle of 2014.

[Additionally], the continued rise in export orders and an uplift in new orders from the domestic market provided evidence that the foundations for continued growth were still buoyant’.

Mr Brock concluded with on a cautious note, forecasting that;

‘If supply chains are still challenged, rising costs for manufacturers are cascaded to consumers and Brexit uncertainty returns, the manufacturing sector may not have the fuel necessary to power itself into a winning position towards the end of the first quarter’.

Australian Dollar to Pound Exchange Rate Forecast: AUD/GBP Volatility ahead on Services Sector Data

Both the Australian Dollar and the Pound could be shifted by data concerning the services sector in the near-term.

The Australian reading will come first, when AIG announces its services activity reading for February on the night of 5th March.

The Australian Dollar could slip when the data is released, if it shows a forecast-matching slowdown in sector activity during the previous month.

On the other side of the equation, the Pound has a chance at advancing against the Australian Dollar and other currency peers on 5th March, when UK services data comes out.

Over February, a rise in the reading is predicted from 53 points to 53.4.

While not major growth on the face of it, this result could still trigger a Pound to Australian Dollar rise as the services sector is of high importance to continued UK economic growth.