GBP/AUD: Aussie Weakens on Manufacturing Data Released by Australia, China 

GBP/AUD slightly increases on Thursday, though it has shown no direction since the first day of the year, after rallying on New Year’s Eve. Currently, one British pound buys 1.8889 Australian dollars, up 0.03% as of 6:45 AM UTC. 

The Aussie has been under increased pressure since yesterday after IHS Markit and Commonwealth Bank of Australia (CBA) released the manufacturing purchasing managers’ index (PMI) data for December. The indicator declined to a record low last month — to 49.2, from 49.9 in November. Analysts expected a decline to 49.4. The first such survey was conducted in May 2016. 

Australia’s manufacturing industry was dragged down by record declines in new orders and output. Also, weakening sales expanded the spare capacity, which led to a decrease in employment. 

The PMI figure is elaborated from questions related to output, new orders, employment, input inventories, and delivery times. 

Besides, the Australian currency was dragged down by China’s factory activity data. Earlier today, Caixin said that China’s manufacturing purchasing managers’ index (PMI) expanded at a slower pace. 

The index slowed last month to 51.5 from 51.8 in November, while analysts expected no change. Nevertheless, the reading maintained above the 50 mark that separates expansion from contraction. 

Production continued to grow at a decent rate, and business confidence increased amid easing trade tensions between the US and China. US President Donald Trump said that the two countries would sign the phase one trade deal on January 15. 

The Caixin manufacturing PMI was less optimistic than the official index released on Tuesday. China’s National Bureau of Statistics said that the manufacturing industry had expanded in December. 

However, Caixin’s index still showed an improvement in business confidence. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group, commented:

“Subdued business confidence was a major factor behind the economic slowdown this year. As the phase one trade deal between China and the US has sent out positive signals, there is room for a recovery in business confidence, which should be able to help stabilize the economy.”

The pound might become more volatile and decline later today after the UK releases manufacturing data as well. 

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