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GBP AUD Exchange Rate Strengthens as CBI Factory Orders Hold Steady

December 18, 2017 - Written by

The Pound Australian Dollar (GBP AUD) exchange rate is rallying this morning as the Confederation for British Industry’s monthly industrial orders beat expectations this morning.

Pound (GBP) Bolstered by CBI Factory Figures

The Pound was strengthened this morning as the data revealed that UK factory orders beat expectations in December.

According to data published by the CBI the factory orders in the UK remained robust this month, with its industrial orders index holding a 30-year high of 17, beating expectations that the index would have slipped to 14.

The survey of 371 manufacturers showed that the strong orders this month were mainly driven by demand from Motor Vehicles and Transport Equipment, and Mechanical Engineering sectors, although order strength was fair robust across the various sub-sectors.

However despite the uptick in orders export orders slipped slightly this month, with many of those responding to the survey expecting that output growth is likely to moderate over the next few months.

There are also growing concerns over the rising costs facing firms particular in regards to input costs as the weakness of Sterling remains a double edged sword for manufacturers.

Anna Leach, CBI Head of Economic Intelligence, said;

‘As we head towards the end of 2017, UK manufacturers’ total order books remain at a near 30 high, with export order books remaining at their strongest since the mid-1990s.’

‘While the lower level of sterling continues to support exporters, cost pressures remain intense. Businesses will expect to see the Government’s Industrial Strategy make rapid progress next year to support manufacturing and the wider economy in every corner of the UK.’

Overall however this is a strong end of the year for UK manufacturers and may help UK economic growth to have picked up a bit more in the last quarter of 2017.

Australian Dollar (AUD) Dips as GDP Revised down

The Australian Dollar is trending lower today after the Australian Government revised down its growth forecast for 2017.

According to the government’s Mid-Year Economic and Fiscal Outlook (MYEFO), real GDP was revised to 2.5% in the 2017/18 financial year, down from 2.75% in May’s budget.

This reflects the significant downturn in household consumption in the tail end of the year.

However on a more positive note the government’s budget outlook is considerably more upbeat, with the government deficit now expected to be AU$23.6bn by the end of the 2017/18 financial year, that’s AU$5.8bn lower than forecast in May.

John Peters, at the Commonwealth Bank said;

‘The recent ‘winks and nudges’ from the national capital hinted at a further improvement in the MYEFO Budget figuring on the back of upgraded company profitability and tax receipts, and despite very tepid wages growth. And that expectation is exactly what Treasurer Morrison delivered earlier today.’

‘In the arcane realm of fiscal policy, and given the vicissitudes and complexity of making spending and revenue forecasts over a span of years, the projected improvement in the fiscal position is not all that substantial. But it is undoubtedly heading in the right direction. And this fact should keep the rating agencies onside for now anyway.’

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Looking ahead the GBP AUD exchange rate may continue to strengthen tomorrow if the CBI’s distributive trade figures prove to be as robust as today’s factory orders, although economists currently forecast that the retail index will have slipped from 26 to 20 in December.

Meanwhile the Australian Dollar may recoup some of its losses overnight with the release of the minutes from the Reserve Bank of Australia’s (RBA) December policy meeting, with the minutes expected to re-affirm the bank’s upbeat outlook.

Current Interbank Exchange Rates

At the time of writing the GBP AUD exchange rate was trending around 1.7479 and the AUD GBP exchange rate was trending around 0.5722.

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