The Pound slid dramatically against both the US Dollar (GBP/USD) and Australian Dollar (GBP/AUD) in Wednesday’s European session. The Sterling exchange rate slipped following the release of weaker-than-forecast UK construction numbers which showed the sector hadn’t been as productive as analysts had hoped.
The Markit UK Construction Purchasing Managers’ Index (PMI) came in at 52.2 in December, rather than the 53.0 forecast, following the previous month’s more fruitful 53.1. This is the sixth consecutive fall and creates some concern that the sector could continue to decline and slip into contraction territory.
PMI survey shows a worrying trend of UK commercial #construction falling for a sixth month running in December, illustrating how uncertainty is curbing business investment. Read more at https://t.co/2034WC6ffd pic.twitter.com/NR80UN8LDO
— Chris Williamson (@WilliamsonChris) January 3, 2018
While the Pound managed to stay within a relatively tight range against the US Dollar for some of the day, positive US ISM Manufacturing figures caused the GBP/USD exchange rate to drop further, trending around -0.50% lower. The US ISM Manufacturing data showed a surprising upswing from 58.2 to 59.7 in December. Not only is this the fastest pace of expansion in the three months, it marks the strongest year of growth since 2004.
The ISM stated: ‘Comments from the panel reflect expanding business conditions, with new orders and production leading gains; employment expanding at a slower rate; order backlogs expanding at a faster rate; and export orders and imports continuing to grow in December.’
Meanwhile, the Australian Dollar’s made some impressive gains against the US Dollar (AUD/USD) of late as investors sell-off the USD. However, the Aussie exchange rate has also had some support off the back of speculation that the Reserve Bank of Australia (RBA) will begin raising rates in 2018.
HSBC’s latest Asian Economics report for Q1 2018 sees economists Paul Bloxham and Daniel Smith explain how they believe the central bank will begin to hike the cash rate by mid-year. The report states: ‘As conditions in the mining industry improve and the local labour market tightens up, we expect a modest pick-up in wages growth, which should, in turn, see the RBA begin to normalise its current very stimulatory cash rate setting in 2018. Our central case is for the RBA to begin to lift its cash rate from mid-2018.’
The Pound to US Dollar (GBP/USD) exchange rate is trading at levels of 1.3512. The Pound to Australian Dollar (GBP/AUD) exchange rate is trending in the region of 1.7248.