Pound Australian Dollar (GBP/AUD) Exchange Rate Dips as Chinese Government Pledges Economic Recovery
The Pound Australian Dollar (GBP/AUD) exchange rate is weakening this morning, amid renewed optimism over China’s economic recovery.
At the time of writing, GBP/AUD is trading at around AU$1.9030, a fall of just over 0.3% from the morning’s opening rates.
Australian Dollar (AUD) Rises as China Plots Economic Recovery Strategy
The Australian Dollar (AUD) is strengthening this morning, following a statement from China’s Politburo earlier today which reaffirmed support for its economic recovery.
With the superpower continuing to struggle in recent months, the news appears to be cheering investors.
Xinhua, an official Chinese news agency, reported that China’s government will:
‘Effectively enhance economic vitality, prevent and resolve risks, improve social expectations, consolidate and enhance the positive trend of economic recovery, continue to promote the effective improvement of quality and reasonable growth of the economy.’
Due to the Australian Dollar’s nature as a Chinese proxy-currency, it is likely seeing extra tailwinds amid this renewed optimism.
Additionally, the ‘Aussie’ may be gaining ground as a sense of cautiously upbeat trade sweeps over markets.
As an acutely risk-sensitive asset, the ‘Aussie’ is able to take advantage of the mood, rising above its peers.
Pound (GBP) Remains Stagnant as Data Drought Continues
The Pound (GBP) is continuing the week’s trend of muted trade this morning, as the continued lack of data prevents movement.
Due to this short supply of releases, the focus remains on the Bank of England’s (BoE) path forward. Markets are eyeing the likelihood of interest rate cuts in 2024, with three cuts priced in already on the back of dwindling inflation.
However, hawkish pushback is expected from the BoE as they aim to reiterate a ‘higher for longer’ strategy. As such, markets are likely hedging their bets ahead of further communication from the central bank.
James Smith and Chris Turner, from ING, commented:
‘[The Bank of England’s] November forecasts, premised on rate cut expectations at the time, indicated that inflation may still be a touch above 2% in two years’ time. That was a hint, if only a mild one, that markets were prematurely pricing easing – and rate cut bets have only been ramped up since.’
Pound Australian Dollar Exchange Rate Forecast: UK Labour Data in Focus
Looking ahead to early next week for the Pound, Tuesday brings the release of the latest crop of UK labour data.
Wage growth and unemployment rates for October are expected to cool and tick upward respectively, which may weaken Sterling. If unemployment increased on a monthly basis, indications of weakness in the UK labour market could spark recession anxieties.
Should wage growth cool as expected, pared back BoE hike bets could weaken Sterling against its rivals.
For the Australian Dollar, Reserve Bank of Australia (RBA) Governor Michele Bullock is due to deliver a speech on Monday.
As markets now believe the RBA’s tightening cycle is over, a hawkish speech could do very little for the ‘Aussie’.
This is followed by the latest Westpac consumer confidence data, reflecting attitudes in December. Economists expect a rise in consumer optimism, which could boost AUD exchange rates.