Pound Australian Dollar Exchange Rate News: GBP/AUD Climbed amid Cautious Chinese Economic Targets

March 6, 2023 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Climbed amid Cautious Chinese Economic Targets

Australian Dollar (AUD) Quiet ahead of RBA Rate Decision

The Australian Dollar (AUD) came under renewed pressure on Monday in the wake of China’s modest GDP growth targets.

The world’s second largest economy outlined their less-than-ambitious economic targets for the year, with China targeting a 5% growth. Lower than market estimates, the cautious approach to the steadily improving economy dampened market sentiment. Iris Pang, Chief Economist for China at ING, said of the target:

‘The slower-than-expected GDP growth target set by the government of around 5% matches our GDP forecast of 5% for this year. The government realises that a weakening external market would impose challenges to China’s export-related industries.’

With the crucial interest rate decision looming, AUD investors could be holding back from any movements until then. Economists at ING said of the impending decision:

‘We expect that the upcoming RBA meeting is going to be much more interesting than has been the case recently. The RBA will want to see confirmation of a downward trend in inflation, not just a reversal of seasonal spikes to even consider pausing its current 25 bps per meeting tightening strategy.’

Pound (GBP) Mixed amid Domestic Concerns

Meanwhile, the Pound (GBP) struggled for a clear direction against many of its peers on Monday morning, as a lack of data left Sterling exposed to domestic woes. A cautious market mood and economic uncertainty allowed the Pound to gain against the riskier Australian Dollar.

A surprise recovery in the construction sector provided modest support to Sterling as PMIs leapt to 54.6, the highest since May 2022 amidst rebounding optimism. Against expectations of 49.1, and easily beating January’s figure of 48.4, construction PMI bounced back, buoying GBP investors. Tim Moore, Economics Director at S&P Global, said of the latest data:

‘Construction companies appear increasingly confident about the year ahead business outlook, with optimism rebounding strongly from the lows seen in the final quarter of 2022.’

GBP/AUD Exchange Rate Forecast: RBA Interest Rate Decision to Buoy the Aussie?

Looking ahead, the Pound Australian Dollar exchange rate could see movement when the Reserve Bank of Australia (RBA) reveal their latest rate decision. Expectations of the central bank to increase the interest rates by 25bps are all but baked in at this point. But further attention will be towards how hawkish the accompanying statement and minutes will be.

Elsewhere, the Pound could limit any potential gains for the ‘Aussie’ if retail sales from the British Retail Consortium (BRC) print true. An expected 4.8% increase in retail sales YoY could bolster the Pound on a steadily improving retail sector.

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TAGS: Pound Australian Dollar Forecasts