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AUD/GBP Tumbles as Australia’s Construction Sector Suffers Slowdown

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Sharp Drop in Construction PMI Prompts AUD/GBP Plummet

The Australian Dollar Pound (AUD/GBP) exchange rate trended lower at the start of this week’s session as markets reacted to Australia’s latest Construction PMI.

At the time of writing AUD/GBP has tumbled 0.21%, or roughly half a cent from the week’s starting levels.

Australian Dollar (AUD) Pressured by Construction Slowdown

The Australian Dollar was forced to go on the retreat on Monday following a marked drop in Australia’s latest Performance of Construction Index (PCI).

According to data published by the Australian Industry Group (Ai Group) the domestic construction index plummeted from 57.5 to 52.8 in December, falling well below the more modest dip to 56 that had been predicted.

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This was the slowest pace of growth in eight-months and continues the deceleration that sector has witnessed since striking a record high of 60.5 in July.

The decline appeared to be mostly driven by a slowdown in engineering and housing projects, both of which have contributed considerably to the sectors growth in recent months.

Analysts at Ai Group said;

‘Across industry sub-sectors, engineering construction and house building remained the strongest performing areas of construction activity in December. However, the pace of activity growth in both sectors was well down on the solid increases recorded in November.’

Economists also warn that this downtrend could continue into early 2018 as a lull in new work orders points to an easing in the sector over the next few months.

Pound (GBP) Gains Trimmed by House Price Figures

At the same time the Pound found its gains dented late on Monday by the release of the UK’s latest House Price Index.

Figures released by Halifax Bank revealed that UK house price growth tumbled from a downwardly revised 0.3% to -0.6% in December, disappointing investors who had forecast that prices would only decelerate to 0.2%.

The final reading for 2017 also revealed that year-on-year, price growth plummeted from 3.9% to 2.7% as concerns over falling wages and economic uncertainty weigh on the housing market.

AUD/GBP Forecast: Fall in Building Permits to Further Weaken Australian Dollar?

Looking ahead the AUD/GBP exchange rate may continue to slide on Tuesday as domestic data is forecast to show a sizeable contraction in the Building Permits issued in November.

Meanwhile the Pound may be meet by volatility overnight as British Prime Minister Theresa May announces the changes made in her recent cabinet reshuffle, with the possibly of a greater proportion of ministers supporting Brexit likely to weaken Sterling sentiment.

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