Unexpected Jump in China’s Factory Activity Sends the Pound Australian Dollar (GBP/AUD) Exchange Rate Lower

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Falls as China’s PMI Rebounds

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped by around -0.3%, leaving the pairing trading at around AU$1.9992.

The Australian Dollar made some gains today after an unexpected rise in China’s factory activity today.

March saw factory activity rebound after collapsing just a month before, boosting risk appetite and the risk-sensitive ‘Aussie’.

China’s PMI jumped from February’s record low of 35.7 to 52 in March.

However, analysts have warned that a stable recovery is not assured as the global pandemic continues to weigh on foreign demand, and the unprecedented lockdowns continue.

There is also the threat of a global recession as the coronavirus continues to spread across the globe.

In a note to’ clients, senior China economist at Capital Economics, Julian Evans-Pritchard wrote:

‘This does not mean that output is now back to its pre-virus trend. Instead, it simply suggests that economic activity improved modestly relative to February’s dismal showing, but remains well below pre-virus levels.’

Added to this, risk appetite received a slight boost after the World Health Organization (WHO) said countries who took coronavirus measures two to three weeks ago should start to see stabilisation soon.

Pound (GBP) Slumps as Economy Flatlines Before Coronavirus Crisis

Sterling slumped against the ‘Aussie’ Dollar after data showed the British economy flatlined before the coronavirus pandemic hit.

The Office for National Statistics (ONS) showed that in the final three months of 2019, economic growth stagnated at 0%.

The data suggests December’s General Election failed to spark an upswing in economic growth despite some surveys suggesting growth had picked up.

Commenting on this, Rob Kent Smith of the ONS noted:

‘Growth in services was offset by a drop in construction and yet another fall in manufacturing.

‘Household spending also saw no growth in the last three months of the year while business investment continued its recent weak path, with a decline at the end of 2019.’

Pound Australian Dollar Outlook: RBA Meeting Minutes in Focus

Looking ahead, the Australian Dollar (AUD) could suffer some losses against the Pound (GBP) following the release of the Reserve Bank of Australia’s (RBA) meeting minutes.

If the minutes reveal the RBA is overly dovish about the economic outlook due to the coronavirus, it will leave the ‘Aussie’ under pressure.

Meanwhile, March’s final UK manufacturing PMI survey is likely to cause Sterling to suffer some losses.

If manufacturing plummets further into contraction than expected, the Pound Australian Dollar (GBP/AUD) exchange rate will be left flat.

Millie Empson

Contact Millie Empson