Pound Sterling (GBP) vs AUD and NZD Forecast Wobbles on China Data

Published: Monday, 14 March 2016 12:00 BST - Written by John Cameron

STORY LINK Pound Sterling (GBP) vs AUD and NZD Forecast Wobbles on China Data

Risk-Correlated Currencies Decline on Global Economic Slowdown Concerns

Weekend data out of the world’s second largest economy has increased fears amongst market participants that the global economy may be heading for a renewed slowdown. Chinese statistics have been a driver for investor sentiment since a raft of official numbers from Beijing at the turn of the year triggered heavy stock market losses.

For this reason, data published yesterday pointing to a relatively lowly 5.4% increase in Chinese industrial output during the first two months of 2016, sent shivers down the spine of investors holding Australian Dollar (currency : AUD), New Zealand Dollar (currency : NZD) and Canadian Dollar (currency : CAD) assets.

Significantly, these official figures showed that activity levels in China’s vast economy had plunged to their lowest level since the 2007 – 09 global financial crisis. The release spells particularly bad news for those holding AUD and NZD-denominated assets, given China’s position as the number one export destination for Australian and New Zealand shipments.

Nevertheless, the immediate market reaction to the publication did not unduly weigh down the AUD and NZD – the Pound Sterling Australian Dollar exchange rate currently stands at 1.9045, having spent the latter part of last week trading in the 1.9300s. Meanwhile, the Pound New Zealand Dollar exchange rate remains in the 2.1400s at the time of writing.

Global Stocks Rally after PBoC President Zhou Comments

Elsewhere, global stock markets are trading into positive territory, suggesting that investors remain unfazed by the Chinese figures.

Comments from Zhou Xiaochuan, governor of the People's Bank of China, in response to the statistics, may explain why. Zhou confirmed that he is still confident that the Chinese economy will achieve the government target of an average GDP growth rate of 6.5% in coming years, noting that, ‘excessive monetary policy stimulus isn't necessary to achieve the target… If there isn't any big economic or financial turmoil, we'll keep prudent monetary policy.’


Some FX insiders remain unconvinced, making the medium term forecast for AUD and NZD neutral to negative.

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