Doubts over China GDP Data Forecast to Send Pound Sterling Australian Dollar Exchange Rate Higher GBP AUD

October 20, 2015 - Written by Toni Johnson

STORY LINK Doubts over China GDP Data Forecast to Send Pound Sterling Australian Dollar Exchange Rate Higher GBP AUD

Chinese GDP Data Impacts GBP, AUD, NZD, CAD Exchange Rate Trading Today

Last night’s official statistics from the Chinese government revealed that growth levels in Asia’s number one economy had slumped to their lowest level in six years during the three months until the end of September. The GDP figures, which took on added significance thanks to Chinese President Xi Jinping’s visit to the UK, revealed a year-on-year pace of expansion of 6.9%. Although disappointing, this was not as bad a result as the annualised 6.8% which analysts had forecast.

Pound Conversion Rate Initially Declines against New Zealand Dollar, Australian Dollar

The initial response from investors was mildly positive, with Europe’s equities markets opening significantly higher than last week’s closing level. Meanwhile, the Pound Sterling (currency : GBP) recorded sustained losses against the Commodity Dollars in the immediate aftermath of the release from China, with the Sterling Australian Dollar exchange rate dropping into the 2.1100s GBP AUD, while the Pound New Zealand Dollar exchange rate edged back down into the 2.2600s GBP NZD.

GBP NEWSFLASH: Pound Rebounds as Chinese Growth Concerns Grow Today

However, the mildly positive effect of the growth numbers from China wore off as the day progressed, perhaps in part because of the seemingly endless succession of economists queueing up to doubt the veracity of the Chinese government data. Dismal trade balance figures and surveys of activity from individual sectors of China’s economy in recent weeks have lead many FX insiders to suggest that China’s GDP may actually be as low as a year-on-year 4.5%. Michael Hewson of CMC Markets summed up the mood in the markets when he suggested earlier that, ‘while most people accept that China’s GDP numbers should only be taking at face value, due to concerns that it is artificially inflated, this number does seem surprisingly good given how weak some of the more recent individual data components have been. This is borne out by a much bigger than expected drop in the September industrial production numbers, which came in at 5.7% and well below expectations of 6%, and well down from 6.1% in August, while Chinese retail sales saw an increase of 10.9%, only slightly higher than August’s 10.8%. Fixed asset investment also disappointed, coming in at 10.3%, down from 10.9% in August.’

GBP-NZD Exchange Rate Predicted to Extend Gains

Most investors appear to agree with Hewson; by the middle part of yesterday’s US equities session, the GBP AUD exchange rate had recovered to as high as 2.1340 with GBP NZD pushing on towards the 2.2800 level. Further gains are forecast for the Pound against these high-yielders if doubts about the strength of China’s ‘economic miracle’ persist.

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