Pound Sterling GBP Gains Forecast vs AUD NZD CAD on China Slowdown

October 5, 2015 - Written by Toni Johnson

STORY LINK Pound Sterling GBP Gains Forecast vs AUD NZD CAD on China Slowdown

Foreign Exchange Forecast: Chinese Slowdown Impacts Currency Exchange Movement

For many months, until the Greek crisis reached a climax during the early part of Summer, nervousness amongst global investors, as measured by the VIX ‘fear index’, remained at rock bottom levels. However, recent weeks have seen VIX spike to its highest since the global financial crisis of 2008 / 09 as market participants expressed their concerns regarding an apparent slowdown in the pace of economic expansion in the world’s premier driver of growth – China.

Unreliable China Manufacturing Data Causes GBP, AUD, NZD, CAD Exchange Rate Volatility

An age old adage in the markets states that official government statistics from China cannot be trusted, so last week’s official manufacturing sector survey, which printed at a higher than anticipated level, was taken with a large pinch of salt by most FX insiders. The private sector version of the same data, published a few days earlier, had shown an accelerated pace of contraction in the key area of Asia’s premier economy. So who should we believe?

FX ALERT: Chinese GDP Data Questioned by Premier Li Keqiang

Reports suggest that even Chinese Premier Li Keqiang has little faith in his nation’s official economic statistics, and in particular in China’s quarterly Gross Domestic Product numbers. This lack of belief is so deeply entrenched that he has taken to tracking domestic growth by looking at real data sets including the expansion in Chinese Yuan denominated bank loans forwarded, volumes of freight shipped and aggregate units of electricity used. Asian economists suggest that the ‘Li Keqiang Index’, as his measure has become known, points to economic growth of an annualized 2.5%.

Pound Sterling Predictions: GBP Could Return to Best Rates against Australian Dollar, New Zealand Dollar and Canadian Dollar

If the numbers coming out of China increasingly corroborate such a situation then most analysts forecast that the Pound Sterling (currency : GBP) will record strong gains against the high-yielding Australian Dollar (currency : AUD), New Zealand Dollar (currency : NZD) and Canadian Dollar (currency : CAD) in the medium to long term. Meanwhile, the safe haven Japanese Yen (currency : JPY) is forecast to bully the Pound for the same reasons.

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