Pound Australian Dollar Exchange Rate News: GBP/AUD Strengthened on Poor Chinese Data

August 15, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Strengthened on Poor Chinese Data

Australian Dollar (AUD) Plunged on Slowing Chinese Economy

The Australian Dollar (AUD) failed to find demand on Monday as data out of China widely fell short of expectations. Both retail and industrial production data missed market forecasts and printed far lower, highlighting a weaker-than-expected economy.

Chinese retail sales rose by 2.7% YoY for the month of July, but still printed far below the expected 5% growth. A marked slowdown from the previous month’s 3.1% growth also concerned investors as China’s zero-Covid policy shows no signs of easing with infections still on the rise in some districts, pointing to further slowdowns.

Meanwhile, industrial production also showed a noted slowdown, missing forecasts of a 4.6% rise as they came in at a smaller 3.8% increase YoY for July. A third consecutive month for growth in the industrial sector was marred by a lower-than-expected increase. With Covid still impacting the industrial sector, a fragile economic recovery is sapping demand for the risk-sensitive ‘Aussie’ as China remains its biggest trade partner.

Elsewhere, China continues to impact global market sentiment as it continues its military live-fire drills surrounding Taiwan. It is reported that the US has sent a delegation of lawmakers to Taiwan on Sunday, that once again provoked the ire of Beijing. China’s Defence Ministry said in a statement in response to the second visit:

‘(The exercises were) a stern deterrent to the United States and Taiwan continuing to play political tricks and undermine peace and stability across the Taiwan Strait. (The US delegation visit) fully exposes the true face of the United States as a spoiler and spoiler of peace and stability in the Taiwan Strait.

‘The Chinese People's Liberation Army continues to train and prepare for war, resolutely defends national sovereignty and territorial integrity, and will resolutely crush any form of 'Taiwan independence' separatism and foreign interference.’

Pound (GBP) Firmed Despite Troubling Economic Outlook

The Pound (GBP) found mixed success against its peers as a lack of data left Sterling open to market moods. With troubling domestic woes ever weighing, the cost-of-living crisis is firmly keeping a lid on any meaningful gains as the Institute for Fiscal Studies (IFS) has warned that financial support will have to rise to £12Bn to keep the same level of support promised.

Paul Johnson, director of the IFS, said: ‘As prices of essentials including food, heating and fuel continues to rise, families on low-incomes are facing more uncertainty and pressures. The government is still playing catch up as inflation and the cost of energy continue to spiral upwards. Just achieving what they wanted to achieve back in May will cost an additional £12bn, and a package on that scale will still leave many households much worse off.’

With families already struggling with the cost-of-living crisis, the expected 80% rise of energy bill prices could plunge more families into poverty unless action is taken. GBP investors could remain cautious as the cost-of-living crisis weighs heavily on the UK economy, and the Pound.

GBP/AUD Exchange Rate Forecast: UK Employment Data to Hinder the Pound?

With data remaining thin on the ground for the Pound Australian Dollar exchange rate, all eyes will be on the crucial employment figures for the UK on Tuesday. An expected third consecutive month of unchanged unemployment could provide some support to the Pound. But an unexpected rise could hamper Sterling.

Elsewhere, the meetings from the last Reserve Bank of Australia (RBA) will be released early Tuesday morning. Any further indications to how the central bank will proceed with future rate hikes could influence the ‘Aussie’.

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