Pound to Australian Dollar Outlook: GBP/AUD Climbs as Chinese Growth Fears Continue

January 12, 2015 - Written by Tim Boyer

STORY LINK Pound to Australian Dollar Outlook: GBP/AUD Climbs as Chinese Growth Fears Continue

Pound Climbs Versus Australian Dollar (GBP/AUD) as Chinese Growth Fears Continue

The Pound recorded gains against the Australian Dollar after speculation that Chinese growth was slowing shook the ‘Aussie’. The price of copper dipped below $6,000 a metric ton as Chinese growth accounts for 45% of demand. Analyst Robin Bhar stated: ‘Slowing demand principally out of China, less financing appetite using copper could mean that demand is weak. We think copper can spend some time clearly below the $6,000 level.’

However, weakness in the Chinese economy doesn’t bode well for the Oceanic currency as China is Australia’s largest trading partner. Last week the Chinese government boosted 300 infrastructure projects worth 7 trillion Yuan. Initially the ‘Aussie’ advanced and the price of iron ore increased when demand for the commodity was forecast to rise. However, doubts about Chinese growth are still prominent and economists are expecting 7.0% growth from one of the world’ largest economies this year, in comparison to last year’s 7.4%. Industry expert Steve Hardcastle commented: ‘There are still concerns over the Chinese economy. That’s the overall feeling.’

In addition to doubts about China, the ‘Aussie’ has been pressured lower from weaker-than-forecast domestic figures. Australian Home Loans contracted by -0.7% in November after forecasts for a 1.7% increase. October had registered 0.2% growth. Furthermore, Investment Lending also recorded a -2.2% contraction. The slowdown in the Australian economy is likely to spur speculation that the Reserve Bank of Australia could cut rates in 2015, despite the central bank recently stating it hadn’t considered such an option. Australian Employment Change and Unemployment Rate stats are expected on Thursday which could be of great influence for the Australian Dollar.

Meanwhile, the Pound also experienced disappointment when Lloyds Employment Confidence slipped to -2 in December from the former 1. Although sentiment in the job sector fell at the close of the year, the report still showed a 10-year high. Tuesday will see the release of the British Retail Consortium’s Like-for-Like Sales figure which is expected to record 1.0% growth in December on the year.

In addition, the highly influential UK Consumer Price Index will be published and could be of great interest to investors. Inflation is expected to slip from 1.0% to 0.7% in the month of December. Bank of England Governor Mark Carney stated at a recent press conference that inflation in the UK was likely to temporarily dip below 1.0%, a development that has been encouraged by the falling price of oil.

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