GBP/AUD is advancing in early trading on Monday. Currently, one British pound buys 1.8856 Australian dollars, up 0.26% as of 5:50 AM UTC.
Australia continues to be affected by the bushfires, which has burned over 60,000 square km. The fire crisis has made the headlines for the past few days.
On Monday, the Aussie weakened after Caixin reported that China’s services sector expanded at a slower pace last month.
China’s services purchasing managers’ index (PMI), prepared by Caixin and Markit, slowed to 52.5 in December from 53.5 in November. Any reading above the 50 mark suggests expansion. The indicator has been above the 50-point margin since 2015.
Caixin’s report showed that services companies were concerned about the slowing economic conditions and a lack of staff. The business confidence declined to the second-lowest level since 2005 when the Caixin started to release the survey.
Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, commented: “China’s economy is likely to get off to a quick start in 2020, but it will still be constrained by limited demand for the rest of the year.”
Yesterday, Australian Industry Group (AIG) published its Australian Performance of Manufacturing Index (PMI), which increased last month by 0.2 points in the territory of contraction, to 48.3. Thus, the indicator has been in contraction for the second month in a row for the first time since mid-2015.
AIG CEO Innes Willox commented:
“2019 closed on a disappointing note for Australian manufacturing with production and employment both weaker in December. The main bright spots were the food & beverages sector, which extended the upward trend recorded by the Australian PMI since 2012, and manufactured exports which are benefitting from the competitive level of the Australian dollar relative to other currencies.”
Willox added that the downturn in manufacturing was a clear sign that the economy was slowing. More fiscal stimulus is might be needed in this situation.
The British pound is looking confident several weeks ahead of the official Brexit date on January 31, when the UK will finally leave the European bloc.
