GBP/AUD has been trading sideways since last Friday when it rose 0.18%. Currently, one British pound buys 1.8746, showing no clear direction as of 7:30 AM UTC.
The Aussie is supported by strong economic data published by China, Australia’s largest trading partner. China’s manufacturing purchasing managers’ index (PMI) beat analysts’ expectations in December. The country’s National Bureau of Statistics (NBS) announced earlier today that the indicator rose to 50.2, while economists anticipated expansion to 50.1. The 50 points mark separates expansion from contraction.
China’s economy has likely hit its bottom in October, given that its manufacturing PMI has expanded for the second consecutive month. This is a positive sign including for Australia.
The sub-index of new orders for export increased above 50 for the first time in 19 months, to 50.3 from 48.8 in November.
Nevertheless, China’s non-manufacturing PMI growth narrowed to 53.5 from 54.4.
While December showed the second month of expansion, Nomura analysts warned that the trend might not be steady, especially amid struggling property sector. Nomura said in a note:
“We do not think Beijing will overreact to the two consecutive above-50 manufacturing PMI readings, as we believe it learned the lesson from spring this year, when some headline data pointed to a seeming recovery. We expect Beijing to roll out more easing measures despite limited policy room in coming quarters.”
The Aussie is also supported by optimism around the trade deal between the US and China. The world’s two largest economies will likely sign the phase one deal in the first week of January. Yesterday, trade adviser Peter Navarro said that the preliminary deal was already completed. He told Fox News:
“That’s a done deal, put that one in the bag.”
Navarro declined to comment on a recent report by the South China Morning Post that Chinese emissaries will travel to the US this weekend to sign the accord.
On the other side, the sterling has increased against majors as investors’ worries about a potential no-deal Brexit eased.
Both the UK and Australian markets close early on New Year’s Eve.