The Australian Dollar (AUD) exchange rate climbed to its best level in a week on Thursday as Chinese data supported and as weak retail sales data weighed upon sentiment towards the Pound (GBP).
Early in the session, data out of China showed that Australia’s largest trading partner and the world’s second largest economy saw an improvement in manufacturing production. According to HSBC, its manufacturing production purchasing managers index (PMI) increased to a reading of 50.4 in October, beating the 50.2 of last month and was better than economist forecast for 50.3.
As China is Australia’s largest trading partner, any positive news out of the Asian nation supports the Australian Dollar.
The data eased concerns that China would miss its GDP target for the end of the year but did highlight that the nation’s economy remains vulnerable.
‘The HSBC China Manufacturing PMI improved to 50.4 in the flash reading for October- up from 50.2 in the final reading for September. Domestic as well as external demand showed some signs of slowing although both remained in expansion territory. Disinflationary pressures intensified as both the input and output price indices declined further,’ said Qu Hongbin, HSBC’s Chief China economist.
Also offering some support to the ‘Aussie’ was the release of a business confidence report from National Bank of Australia (NAB).
The report showed that business confidence held steady in the third quarter of the year.
Business conditions rose slightly to 3 points, from a reading of 1 in the previous quarter, while expected business conditions in the next 12 months also edged higher, lifting to 25 from 24 in the prior quarter.
Weak Data Weighs on Pound
The Pound weakened against the majority of its most traded peers including the US Dollar and Euro as data released by the Office for National Statistics showed that retail sales fell by 0.3% last month, a figure that was worse than the 0.1% drop forecast by economists.
On a yearly basis, retail sales increased by 2.7%, below expectations for 2.8% and was a sharp slowdown from the 3.7% rise recorded in August.
The drop in sales was blamed on mild weather, which put shoppers off buying winter clothes. Other retail sectors also reported a slowdown.
The main cause for the decline is likely to do with UK consumers saving their cash for Christmas. It is likely sales will increase strongly again as the holiday season draws nearer.
Investors will now turn their attention to Friday’s UK GDP growth data. If that comes in below expectations we can expect to see the Pound fall sharply and end the week lower against many of its most traded peers.
UPDATE
The Australian Dollar to Pound Sterling exchange rate is currently trending in the region of 0.5437.
On Friday the AUD/GBP exchange rate has remained relatively static since markets opened. This can be attributed to a lack of Australian data. Additionally, the Pound is holding its position as traders await the Gross Domestic Product data due later on Friday morning.
It is likely, however, that the Australian Dollar will soften over the course of the day as traders revert to risk aversion strategies in the wake of renewed fears regarding the Ebola virus. A New York doctor, Craig Spencer, tested positive for the Ebola virus which has seen high-yielding assets soften, and safe-haven currencies boosted.
Australian Dollar (AUD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Australian Dollar,
,US Dollar,0.8779 ,
Australian Dollar,,Pound Sterling,0.5484 ,
Australian Dollar,,Euro,0.6936 ,
Australian Dollar,,New Zealand Dollar,1.1187 ,
US Dollar,, Australian Dollar ,1.1389 ,
Pound Sterling,, Australian Dollar ,1.8229 ,
Euro,, Australian Dollar ,1.4411,
New Zealand Dollar,, Australian Dollar ,0.8938 ,
[/table]
