GBP/AUD Exchange Rate Falls as Risk Sentiment Improves on China’s Economic Recovery
The Pound to Australian Dollar (GBP/AUD) exchange rate dipped by -0.4% today, with the pairing currently trading around AU$1.79.
The Australian Dollar (AUD) received a boost today after the Chinese services PMI bounced back in June, with the figure rising to 58.4 from May’s 55. As a result, risk-sentiment has improved on hopes that the world’s second largest economy could be on a fast track to economic recovery.
Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, commented on the data:
‘On the data deck, the Caixin services PMI pointed at the fastest expansion in a decade as the emerging market giant accelerated the pace of economic activity to tackle the Covid-led slowdown. The second wave worries didn’t have a material impact on PMI figures, which was very good news for investors.’
China is Australia’s largest trading partner, so signs of improvement in the Chinese economy boosts hope for the Australian economy, which has suffered from the Covid-19 crisis.
In Australian economic news, today saw the release of the latest retail sales figures for May, which beat forecasts and rose to 16.9%. Consequently, this has buoyed hopes that the economy could recover faster-than-expected from its first recession in thirty years.
Pound (GBP) Sinks as UK Services PMI Remains in the Doldrums in May
The Pound (GBP) struggled today after the EU Brexit negotiator Michel Barnier complained about a lack of respect in negotiations with the UK. As a result, investors are becoming wary of Sterling over fears of a possible no deal in December.
Today also saw the UK’s services sector remain lodged in contraction territory at 47.1. Nevertheless, there are reassuring signs that it is levelling off as shops reopen throughout the nation.
Tim Moore, the Economics Director at IHS Markit, commented:
‘June data highlights that the worst phase of the service sector downturn has passed as more businesses start to reopen and adapt their operations to meet social distancing requirements. The proportion of service providers reporting a drop in business activity has progressively eased after reaching a peak of 79% in April. Around 33% of the survey panel signalled a reduction in business activity during June, which compared with 54% in May.’
However, with uncertainty over Brexit and generally downbeat forecasts about the British economy, the GBP/AUD exchange rate has struggled today.
GBP/AUD Forecast: Could a Weak UK Construction PMI Send Sterling Downward?
Australian Dollar (AUD) investors will be looking ahead to Monday’s release of the TD Securities Inflation figure for June. If this shows any signs of improvement, then we could see the ‘Aussie’ edge higher.
Meanwhile, AUD will also be driven by risk sentiment. So, any signs of US-China trade tensions erupting over protests in Hong Kong could prove AUD-negative.
Sterling traders will be keeping a close eye on Monday’s release of the UK Construction PMI for June. However, if this remains lodged in contraction territory, we could see the GBP/AUD exchange rate sink.