The Pound sank against the US Dollar (GBP/USD) and Canadian Dollar on Friday as investors awaited a busy data day. Meanwhile, the Pound was able to climb against the Australian Dollar (GBP/AUD) after Reserve Bank of Australia (RBA) Governor Phillip Lowe announced a pull-back in its inflation forecast which was further iterated in the bank’s quarterly statement on monetary policy.
Reserve Bank of Australia (RBA) Lowers Inflation Expectations
The RBA now expects underlying inflation to slow to 1.75% by the close of 2018, more dovish than it’s previous 2.0% forecast. Inflation has been consistently weaker than forecasts since 2015 and the downward adjustment to interest rates to record lows of 1.5% in August 2016 has been accredited to inflation’s underperformance. However, despite weaker inflation, the RBA still expects strong growth in 2018 and 2019, yet expects interest rates to remain stable for a considerable amount of time.
The Pound to US Dollar (GBP/USD) exchange rate hit a 13-month low on Friday, weakening by a total of 10% since April. The UK’s manufacturing sector slipped into a technical recession in the last quarter, after contracting by -0.9%.
The UK manufacturing sector is now in technical recession, contracting two quarters in a row. First time since early 2016. Slightly awkward for the Chancellor, who’s brought the media to an advanced manufacturing centre today pic.twitter.com/rDyQin5Gi2
— Ed Conway (@EdConwaySky) 10 August 2018
UK Data Fails to Bolster the Pound Sterling Exchange Rate
In the month of June, Industrial Production came in at 1.1% on the year, while Construction Output managed to climb to 2.2% on the year. For the month of June alone the Manufacturing Production figure reached 1.5% on the year.
Meanwhile, the UK’s Gross Domestic Product (GPD) figure came in at 0.4% in the second quarter, rising to 1.3% on the year. In the US, the latest Consumer Price Index reading for July came in at 2.9% on the year in line with expectations. Average Weekly Earnings inched up by 0.1%.
The Canadian Unemployment Rate slipped lower from 6.0% to 5.8%, beyond the 5.9% forecast. The Net Change in Employment figure also showed 54.1K people entered the workforce in July, much higher than the 17.0K forecast.
The Pound to US Dollar (GBP/USD) exchange rate is trading at levels of 1.2770. The Pound to Canadian Dollar (GBP/CAD) exchange rate is trading at 1.6712. The Pound to Australian Dollar (GBP/AUD) exchange rate is reaching levels of 1.7465.