Australian Dollar Plunges in the Face of Gloomy Chinese Data

GBP/AUD Exchange Rate Accelerates as Chinese Data Disappoints

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is rallying again this morning as AUD investors were spooked by some downbeat Chinese economic data.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7868, up nearly 0.7% so far this morning.

Australian Dollar (AUD) Undermined by Weak Chinese Data

The Australian Dollar (AUD) is trending lower again this morning, giving up a portion of its gains from Tuesday as AUD investors react to some gloomy Chinese economic data.

This saw both China’s retail sales and industrial production figures print lower than expected in July.

China’s National Bureau of Statistics (NBS) reported sales growth rose 7.6% versus 8.6% forecast and factory output only expanded by 4.8% against expectations of a 5.8% bump.

The drop stoked concerns of a prolonged slowdown in the Chinese economy, weakening appetite for the ‘Aussie’ due to its status as a proxy for China.

China’s disappointing data also offset the publication of Australia’s own data on Wednesday, which saw the domestic wage price index unexpectedly tick higher in the second quarter.

Pick-up in Inflation Buoys the Pound (GBP)

Meanwhile, the Pound (GBP) found support this morning thanks to the publication of the UK’s latest CPI figures.

GBP investors welcomed the release this morning as the Office for National Statistics (ONS) reported domestic inflation ticked up from 2% to 2.1% in July.

This beat forecasts inflation would slow to 1.9% and keeps it within the Bank of England’s (BoE) target range.

Sterling sentiment was buoyed by the unexpected rise as it is likely to lift some of the pressure on the BoE to potentially cut interest rates later in the year.

GBP/AUD Forecast: How Will the UK’s Retail Sales Figures Impact Sterling?

Looking to the second half of the week, we are likely to see the Pound to Australian Dollar (GBP/AUD) exchange rate stumble again on Thursday, with the release of the UK’s retail sales figures.

Markets are expecting to see domestic sales growth contract again in July, with economists predicting retail sales to tumble from 1% to -0.2%.

This will likely see Sterling soften in response as it will feed into fears the UK could slip into a recession this year.

In the meantime however, we may see the ‘Aussie’ extend its losses overnight, as Australia publishes its latest jobs report.

Analyst forecast this will show that the domestic unemployment rate held at 10-month high of 5.2% in July, as well as revealing a worrying drop in full-time employment.

This could result in a sharp drop in AUD exchange rates overnight as it likely stokes speculation that the Reserve Bank of Australia (RBA) will continue to cuts rates this year as it seeks to boost employment.

Matthew Andrews

Contact Matthew Andrews