Pound Climbs against ?Aussie? (GBP/AUD) as Chinese Data Weighs on Australian Dollar

April 13, 2015 - Written by Tim Boyer

STORY LINK Pound Climbs against ?Aussie? (GBP/AUD) as Chinese Data Weighs on Australian Dollar

Pound to Australian Dollar Exchange Rate Gains on Poor Chinese Trade Stats

The Pound advanced against the Australian Dollar following weak Chinese data in what promises to be an extremely quiet day for ecostats.

The ‘Aussie’ softened in response to Chinese trade data showing a massive decline in the nation’s trade balance as well as a slump in both imports and exports. As China is Australia’s largest trading partner, any negative developments in one of the world’s largest economies can severely pressure the ‘Aussie’ exchange rate lower.

Industry expert Matt Simpson stated: ‘The forecast trade balance was $US43.4 billion and it came in at $US3.1 billion. That’s a huge differential. It’s the lowest since February 2014 when it was negative.’

The weaker-than-expected figure is likely to heighten speculation that a Chinese slowdown is indeed taking place and could potentially spur arguments that the Reserve Bank of Australia will cut interest rates in the near future.

Will the RBA Cut Interest Rates?

Analyst Daniel Bean commented: ‘It’s part of the Chinese story that’s not growing as expected. It’s another sign of the overall health of the Chinese economy not being what Chinese authorities thought it would be at this point.’
Exchange rates are extremely sensitive to any talk on the topic of borrowing costs as any change in rates can severely impact the economy and the native currency. If the RBA does appear to be getting closer to making another downward adjustment to rates, the ‘Aussie’ could soften significantly.

The Pound has been extremely sensitive to speculation regarding rates this year after much debate on the subject last year. The Bank of England appeared to be on the verge of introducing higher borrowing costs last year with a hawkish chief and divergence amongst policymakers occurring frequently. However, it appears as if the bank’s gotten cold feet in the run up to the UK general election with dovish tones dominating the most part of 2015 and losing the Pound support.

The run up to the general election is likely to cause Pound exchange rate weakness while the aftermath of a potential hung parliament or political shakeup damages the UK currency further.

However, the nation’s economic recovery has been progressing at a fairly consistent pace and investors are looking towards Tuesday’s inflation figures. Any upbeat ecostat could bolster the Pound, while any negative reading could place some significant pressure on Sterling. Wednesday will be a pretty quiet day for UK economic data, leaving a lot of the Pound’s movement to any global developments or electoral debate.

The AUD/GBP currency pair was trading in the region of 0.5169


Australian Consumer Confidence will follow in Wednesday’s session.-->

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