GBP AUD & GBP NZD Exchange Rates Forecast to Strengthen Following Poor Chinese Data

Modified: Tuesday, 2 February 2016 16:17 BST - Written by John Cameron

STORY LINK GBP AUD & GBP NZD Exchange Rates Forecast to Strengthen Following Poor Chinese Data

Positive UK Manufacturing Data Provoked GBP Surge Yesterday

Yesterday morning’s Markit Purchasing Managers’ Index (PMI) survey of Britain’s manufacturing sector was expected to provide another body blow to the Pound Sterling (currency : GBP). The UK unit was already reeling from a potential vote for Britain to leave the European Union before the end of the year and ultra-low domestic inflation expectations, so the prospect of the January survey showing a renewed slowdown in British manufacturing posed a real threat to the Pound.

Any print of above 50.0 from a PMI survey indicates that activity levels in the sector being measured are expanding and analysts were forecasting another result of above this threshold from the January UK factory output report. However, the result was expected to show a significant reduction from December’s showing of 52.1, so the print of 52.9 came as a bonus for investors holding Sterling-denominated assets.

GBP/EUR Conversion Rate Climbed Close to 1.3200

The PMI survey’s outcome represented the highest result from the figure for three months. The sluggish activity in the manufacturing sector had been of particular concern to economists recently, especially as the latest GDP figures showed how reliant on services the UK economy was.

The Pound Sterling euro exchange rate climbed from an intraday low of 1.3108 up to almost 1.3200 following the release and analysts forecast that there could be further near-term gains to come for the Pound, particularly given the disappointing print from January’s whole of eurozone equivalent of the PMI manufacturing survey, which revealed a drop in the pace of expansion in the sector from December’s 52.3 to 52.3.

The result provides further evidence that the European Central Bank’s €60bn per month Quantitative Easing programme is not having its desired effect and may need to be extended at the ECB’s March policy meeting.

Weak Chinese Factory Output Weighed on NZD and AUD Yesterday

Meanwhile, on the other side of the world, China’s latest version of the official PMI manufacturing survey, published during the early hours of yesterday morning, also came in at below analysts’ expectations, printing at 49.4 versus an anticipated 49.6.

The result showed that Chinese factory output shrank for the sixth month on the trot during January and FX insiders forecast that this may weigh on the export-driven Australian Dollar (currency : AUD) and New Zealand Dollar (currency : NZD) in the short term

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Australian Dollar Forecasts New Zealand Dollar Forecasts Pound Euro| Forecasts