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Pound Australian Dollar Exchange Rate News: GBP/AUD Falls as Chinese Growth Slows

January 17, 2022 - Written by John Cameron

GBP/AUD Stumbles Despite Slowdown in Chinese GDP

The Pound Australian Dollar (GBP/AUD) exchange rate is losing ground at the beginning of today’s session in spite of disappointing Chinese GDP figures.

The Australian Dollar has received support from a risk-on mood fuelled by the People’s Bank of China (PBOC) lowering interest rates in attempt to boost growth in response to slowing growth.

At the time of writing, the GBP/AUD exchange rate is trading at approximately €1.8991, down roughly by 0.3% since the opening of today’s levels.

Australian Dollar (AUD) Trends Higher as China’s Central Bank Cuts Interest Rates

The Australian Dollar (AUD) is edging higher against the Pound (GBP) this morning after the PBOC surprised markets by cutting interest rates in a bid to boost the Chinese economy following a slowdown in growth.

As a proxy to the Chinese economy due to their close trading partnership, the ‘Aussie’ has received support from the decision from China’s central bank.

The release of Chinese GDP figures showed a slowdown in economic growth, printing at the weakest expansion in 18 months at 4%, higher than the forecast of 3.6%, though lower than the previous 4.9%.

However, the quarterly GDP figures printed at 1.6%, higher than both the forecast of 1.1% and the previous figure of 0.7%.

Yue Su, from the Economist Intelligence Unit, said:

‘The GDP figure didn't reflect the impact of domestic spread of the Omicron variant since late December which will hit the service industry significantly, especially offline consumption and transportation.’

In effort to boost the Chinese economy, the People’s Bank of China (PBOC) has announced it will lower the interest rate to 2.85%.

AUD is benefitting from the risk-on mood triggered by the PBOC rate cut, although concerns over China’s and the global growth outlook are weighing on the Aussie.

Pound (GBP) Slips Despite Lowest Report of Coronavirus Cases in a Month

The Pound (GBP) is facing headwinds against the Australian Dollar (AUD) at the beginning of today’s session despite the lowest report of coronavirus cases since 15th December 2021.

Week-on-week hospital admissions fell last week, as reported Omicron infections dropped since the start of the new year.

From this week, the isolation period for negative-testing individuals has been reduced from 7 days to 5 in effort to create a stronger economy.

This will ease staff shortages across sectors and strengthen economic recovery, bolstering Sterling’s potential.

Professor Julian Hiscox, chairman in infection and global health at the University of Liverpool, said:

‘We're almost there, it is now the beginning of the end, at least in the UK. I think life in 2022 will be almost back to before the pandemic.’

On the other hand, deaths reported following a positive test continues to rise, with a 45% increase over the past 2 weeks.

Meanwhile, the undercurrent of political tensions continue to weigh on GBP.

‘Operation: Big Dog’ is reportedly circulating Parliament with the target of preserving Boris Johnson’s, the UK Prime Minister, current position of power as he is investigated for breaking lockdown rules in 2020.

As Sue Gray investigates Johnson and the allegations against him, he and his team are asking for ‘patience’.

Though the UK’s political turmoil is placing downside pressure on Sterling, it is unlikely to burden GBP too much as government policies won’t change immediately, should Johnson be ousted.

GBP/AUD Exchange Rate Forecast: BoE Rate Hike Bets to Steer GBP Appeal

Looking ahead, the Pound Australian Dollar (GBP/AUD) exchange rate is likely to be influenced by UK unemployment and wage growth figures due to be released tomorrow.

Unemployment in the UK is forecast to remain unchanged at 4.2% in November, while average wage growth is expected to decline from 4.9% to 4.2%.

Signs of strength in the UK jobs market may support expectations for the Bank of England’s (BoE) to hike rates at its February meeting which could bolster GBP.

Additionally, November’s unemployment rate is also scheduled for release on Tuesday, forecast to remain unchanged at 4.2%.

Meanwhile, the riskier-perceived ‘Aussie’ is likely to remain vulnerable to market risk appetite due to a lack of notable data scheduled for release in the beginning of this week’s session.

Moreover, the Westpac Australia consumer confidence index for January is scheduled for release on Tuesday, forecast to slip slightly from 104.3 to 104.

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