China ALERT: Prediction of Price Action for Pound Sterling (GBP) vs Australian Dollar (AUD) and New Zealand Dollar (NZD)

Published: Friday, 14 August 2015 14:00 BST - Written by John Cameron

STORY LINK China ALERT: Prediction of Price Action for Pound Sterling (GBP) vs Australian Dollar (AUD) and New Zealand Dollar (NZD)

AUD, NZD, ZAR Conversion Rates Struggle after PBoC Announcement, Pound Sterling Fluctuates

China remains the number one export destination for both Australia and New Zealand, so the recent wobble in sentiment towards Asia’s premier economy has had a pronounced effect on the relative value of the Pound Sterling (currency : GBP) against both the Aussie and the Kiwi Dollars.

Yuan (CNY) Devaluation Sees GBP to AUD, NZD Exchange Rates Gain this Week

The People’s Bank of China’s surprise action in actively weakening the Yuan during recent sessions has hit support for the AUD and NZD hard. When China’s policymakers opted to devalue their local currency by 1.9% during the first session of this week, they billed it as a ‘one-off depreciation’. However, their continued lowering of the value of the Yuan during the subsequent 48hrs gave lie to this statement.

Pound Sterling Hits Best Rate Against Australian Dollar, New Zealand Dollar

The policy move is aimed at improving China’s terms of trade, with the nation’s exports becoming more competitively priced in foreign markets. However, the development will also have the effect of increasing the prices of Australia and New Zealand’s exports into China, making it tougher for them to sell their plentiful exports in this key market. The Pound Sterling Australian Dollar and Pound Sterling New Zealand Dollar exchange rates broke through the 2.1500 GBP AUD and 2.4000 GBP NZD barriers respectively during the immediate aftermath of the action from the People’s Bank of China (PBoC).

Fed Rate Hike Predictions Pared after Chinese Developments, AUD, NZD Movement Forecast

The move from the PBoC has proved equally unpopular with policymakers in the world’s premier economy. The US Treasury Department issued a knee-jerk response following the development in China and it does not bode well for the chances of a rate increase from the Federal Reserve any time soon. Washington stated that, ‘while it is too early to judge the full implications of the change, China has indicated that the changes announced today are another step in its move to a more market-determined exchange rate. We will continue to monitor how these changes are implemented and continue to press China on the pace of its reforms, including additional measures to transition to a market-oriented exchange rate and its stated desire to move towards an economy that is more dependent on domestic demand, which is in China and America's best interests. Any reversal in reforms would be a troubling development.’ If China continues with its current policy, then analysts forecast the Pound Sterling US Dollar exchange rate will track higher.

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