GBP/AUD Starts Week on Bearish Note

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GBP/AUD started the week on a bearish note, as the Australian dollar is backed by investors’ optimism over the global economy after China reported better-than-expected factory activity data.

Currently, one British pound buys 1.9072 Australian dollars, down 0.06% as of 5:35 AM UTC. The pair continues to move in up and downs. Nevertheless, judging by larger timeframes, the mood is still bullish for the sterling.

For the moment, the Aussie is driven by China’s manufacturing data that beat analysts’ forecasts. The manufacturing purchasing managers’ index (PMI), prepared by Caixin/Markit, rose to 51.8 last month, from 51.7 in October, showing the fastest growth in three years. Analysts surveyed by Reuters had anticipated a decline to 51.4.

China is the largest trading partner of Australia. Thus, any significant economic update released by China might have a great impact on the Aussie.

In parallel, investors’ hope for a trade deal between the US and China increased even though US President Donald Trump signed two bills that favor Hong Kong protesters.

Hiroyuki Ueno, a senior strategist at Sumitomo Mitsui Trust Asset Management, commented:

“It looks a bit difficult for two countries’ leaders to shake hands and sign a deal this month. What is more likely is to essentially kick the can, with China buying more US farm products while the US postpones its next tariffs.”

He added that markets would consider such an agreement as a de facto deal whether they sign it or not officially.

In the UK, the pound has slightly weakened on fears that the British economy will suffer from political uncertainty. Earlier today, the Confederation of British Industry and Make UK downgraded their growth outlook for 2020. The two industry leaders don’t expect any significant improvement next year even if Prime Minister Boris Johnson wins the election on December 12.

The CBI expects economic growth of 1.3% this year and 1.2% next year, which is slightly lower than the previous forecast released in July.

CBI chief economist Rain Newton-Smith explained:

“Alongside perennial Brexit uncertainty, (businesses) are also contending with softer global demand.”


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