The GBP v AUD exchange rate rallied another 0.65% after PMI data from both countries told a different story. The Australian manufacturing and services indices showed a contraction again as similar data from the UK showed a strengthening economy. The data led to further gains in the British pound and saw the pair trading at 1.9600 on Friday afternoon.
PMI Data Release Shows UK Strength and Aussie Weakness
Australia saw the release of the CBA PMI index for the manufacturing and services sectors of the economy. Markets look for numbers above 50 as expansion and below that level indicates contraction. Both Australian figures came in just below 50 for the month but highlighted stickiness in the economic situation.
The negative data from Australia was combined with a more optimistic outlook from the UK PMI data this morning. The same data for the UK came in at 53.3 and 51.9, whilst public sector borrowing also came in less than expected. This combination of data releases saw the pound rally against the Australian dollar once again.
Korean Virus Cases Warn of New Risk Phase for Asian Markets
Asian markets were on alert again going into the weekend as new cases of the virus emerged outside of China. South Korea saw the number of new cases double overnight. The country’s Prime Minister said the situation was an emergency. The virus was also spreading into Japan with 85 cases, not including the 634 cases on the Diamond Princess cruise ship. These are still small numbers, but markets will watch the situation closely to monitor the potential effects on the Asian supply chains.
Australian stocks were lower by almost 1% on the day and this could warn of a failure to hold the record highs and a possible correction in the coming weeks. The economic calendar is light for the UK and Australia in the coming days so the trend of Pound strength and Australian dollar weakness will likely continue into the next week.
The GBP v AUD is trading only 400 pips away from the 2.000 level and the market may try to test that level if the current trend continues. The UK economy is undergoing a post-Brexit bounce as businesses put the uncertainty and confusion behind them and start to hire and invest with more confidence.
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