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Pound Australian Dollar (GBP/AUD) Exchange Rate Dips as Strong Chinese PMI Data Uplifts ‘Aussie’

August 4, 2021 - Written by John Cameron

GBP/AUD Exchange Rate Falls, Chinese PMIs Beat Forecasts and Improve Risk Appetite

The Pound Australian Dollar (GBP/AUD) exchange rate dipped today after the risk-sensitive ‘Aussie’ benefited from stronger-than-expected Chinese PMI data for July. The pairing is currently fluctuating around AU$1.87.

Today saw the release of the Chinese services PMI for July, which rose from June’s 50.3 to 54.9. As a result, this saw an uptick in demand for the risk-sensitive Australian Dollar.

China is Australia’s largest trading partner, so any indications of an improving economy translates to improved Australian market mood.

Dr. Wang Zhe, Senior Economist at Caixin Insight Group, commented on the data:

‘Overall, the manufacturing and services sectors continued to grow in July. Both supply and demand maintained the upward trend, and the employment market stayed stable. The gauges for input and output prices in both the manufacturing and services sectors remained high, indicating immense inflationary pressure. As the July surveys of Caixin China PMIs were conducted after the epidemic in Guangdong province was brought under control, and before Covid-19 resurged in Jiangsu province, the services sector expanded rapidly, though the manufacturing sector was slightly weaker.’

Michael Hewson, the chief market analyst at CMC Markets in the UK, was more cautious however, saying that the rising infection rates across Asia and China could inhibit the nation’s economic recovery.

Hewson said:

‘Not only are we hearing about more cases in China, but we are also getting an acceleration of cases across Indonesia and Thailand, as the virus hunts out the parts of the global economy with low vaccination rates.’

Any further signs of rising Covid-19 infections in China would however see the AUD/GBP exchange rate slide either in today’s session or later this week.

Pound (GBP) Exchange Rate Sinks as UK Services Data Falls Below Forecasts

The Pound (GBP) fell today following the release of July’s UK services PMI data, which fell below forecasts from 62.4 to 59.6. Consequently, GBP investors have become more worried about the outlook for the UK’s largest sector.

Analysts at IHS Markit commented on the report:

‘Staff shortages and supply issues were a severe constraint on business capacity, which led to another strong rise in backlogs of work. Tight labour market conditions led to greater wage pressures across the service economy and this contributed to the fastest increase in overall input costs since the survey began in July 1996.’

Added to this, the ‘pingdemic’ also weakened the performance of the UK economy last month.

In absence of any other UK economic data, Pound investors are looking ahead to tomorrow’s interest rate decision from the Bank of England (BoE).

Today’s weaker-than-expected services PMI could however influence the BoE’s statement tomorrow. Could a dovish central bank see the GBP/AUD exchange rate sink further?

GBP/AUD Exchange Rate Forecast: Australian Trade Data in Focus

Australian Dollar (AUD) investors will be looking ahead to tomorrow’s release of June’s Australian trade balance report.

Any signs of improvement in Australia’s domestic economy would see the AUD/GBP exchange rate head higher.

Risk sentiment will be a key factor for the ‘Aussie’, however. If the Delta coronavirus continues to spread throughout China, then we could see the risk-averse AUD suffer.

Pound (GBP) traders will closely monitor the BoE’s monetary policy report tomorrow. Could a dovish central bank weaken the GBP/AUD exchange rate?

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