Pound Sterling Falls against Australian Dollar (GBP/AUD) Despite Unfavourable Chinese Data

Modified: Monday, 9 February 2015 20:44 BST - Written by Ben Hughes

STORY LINK Pound Sterling Falls against Australian Dollar (GBP/AUD) Despite Unfavourable Chinese Data

The Pound managed to slide quite substantially against the Australian Dollar during Monday’s trading despite poor Chinese data pressuring the Oceanic currency lower.

Pound losses were accredited to the upcoming release of the Bank of England’s inflation report. As consumer prices have been dropping worldwide—a result of tumbling oil values—inflation expectations have been less upbeat in many nations. Many economists are expecting a negative figure from the central bank as it previously stated a dip into negative territory could occur. If the inflation report shows a significant decline it is possible investors will price out rate hikes in 2015 altogether and push the Pound lower in the process. Industry expert Howard Archer commented: ‘We currently believe it is borderline as to whether the Bank of England starts to raise interest rates at the end of this year or holds fire until early 2016.’

The Pound could fluctuate on several pieces of data this week, while also remaining sensitive to political developments. As we draw closer to the general election political parties are making bolder statements in their attempts to lure voters. Labour has recently said that it is willing to offer new fathers paternity leave for four weeks with increased pay. As the prospect of a major shake-up in the current government looms, and acts as another reason to avoid increasing borrowing costs, it is likely the Pound will fluctuate.

Meanwhile, the Australian Dollar had a bad start to Monday’s session after Chinese figures showed imports slumped by -19.9% in January—a piece of bad news for Australia as it holds strong trade links with the Asian nation. China has been the subject of economist and investor scrutiny amid bets the economy has been undergoing a slowdown. The People’s Bank of China has introduced additional stimulus measures in recent months in an attempt to encourage growth. Industry expert Evan Lucas commented: ‘The stalling property market along with the slowing manufacturing sector all signal that import demand is likely to remain subdued. The PBoC will need to do more than just a 50 basis point reduction in the reserve requirement ratio to stimulate these sectors.’

Tuesday will see the release of China’s Consumer Price Index (CPI) which could pressure the ‘Aussie’ lower if unfavourable. Economists presently expect inflation to drop from 1.5% to 1.0% in January. Meanwhile, the Producer Price Index is also set to decline with estimations of a fall from -3.3% to -3.8%.

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