Pound Australian Dollar (GBP/AUD) Exchange Rate Firms as China Posts Modest Growth Target
The Pound Australian Dollar (GBP/AUD) exchange rate is strengthening this morning, following lower-than-expected Chinese growth targets.
At the time of writing, GBP/AUD is trading around AU$1.7842, a rise of roughly 0.3% from the morning’s opening rates.
Australian Dollar (AUD) Downbeat following Modest Chinese Growth Targets
The Australian Dollar (AUD) is weakening this morning, as investors continue to digest China’s economic growth targets.
Outlined on Sunday, the economic superpowered optioned to lowball it’s growth estimates, targeting 5%. This came as a disappointment to markets, who were anticipating 5.5%.
Iris Pang, Chief Economist for Greater China at ING, stated:
‘The slower-than-expected GDP growth target set by the government of around 5% matches our GDP forecast of 5% for this year. The government realises that a weakening external market would impose challenges to China’s export-related industries.’
Because of this, the ‘Aussie’s nature as a Chinese proxy-currency is keeping it on the defensive this morning as investors readjust their hopes for China’s reopening.
Furthermore, AUD may be seeing losses due to a fluctuating market mood. Between the prospect of further interest rate hikes from the Federal Reserve, and the underwhelming growth targets from China. Riskier assets appear to be lacking in appeal this morning.
Pound (GBP) Mixed amid Lack of Data
The Pound (GBP) is seeing mixed trade this morning, due to a lack of impactful economic data releases.
Because of this, market mood and domestic headwinds appear to be the core drivers of movement. With the market mood in flux, Sterling is able to make ground against riskier assets such as the Australian Dollar.
However, a rebound in the construction sector may be cushioning GBP from fully flat trade. This morning’s index showed that the sector jumped to 54.6 in February, far above January’s 48.4. The index further pointed to an increase in optimism among the sector.
Tim Moore, Economics Director at S&P Global Market Intelligence, stated:
‘Construction companies appear increasingly confident about the year ahead business outlook, with optimism rebounding strongly from the lows seen in the final quarter of 2022.’
On the other hand, waning optimism around the so-called ‘Windsor Framework’ could be capping GBP. Markets are still waiting to hear of when a vote on the legislation will take place in the commons.
Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: RBA Rate Hike in Focus
Looking ahead for the Australian Dollar, the Reserve Bank of Australia are due to publish their latest interest rate decision overnight.
The RBA are expected to hike rates by 25bps, which has been priced in by markets already. The main driver of movement is likely to come from any forward guidance provided: if the bank stays hawkish, AUD could rally.
Elsewhere, China’s balance of trade data for January-February is due to print overnight. As a Chinese proxy-currency, the increase in China’s trade surplus could bring strength to the ‘Aussie’.
For the Pound, data releases are relatively thin. Because of this, the focus may be on domestic headwinds. With the ‘Windsor Framework’ still requiring a Parliament vote, any news of a delay or controversy may dampen GBP.