GBP/AUD is declining in early trading on Friday, after gaining over 0.30% yesterday. Currently, one British pound buys 1.8937 Australian dollars, down 0.07% as of 6:35 AM UTC.
The Aussie is trying to make something out of China’s gross domestic product (GDP) data. Earlier today, official data showed that China’s economy increased by 6.0% year-on-year in the last quarter of 2019, in line with analysts’ expectations. China is Australia’s biggest trade partner by a margin, which is why any major change in Beijing’s economic data might be reflected in the AUD pairs.
In annual terms, China’s economy grew 6.1% last year, the slowest in about three decades, though still within the government’s target range of 6-6.5%. In 2018, the GDP grew at a rate of 6.6%.
China has experienced low demand at home and abroad amid a trade war with the US. The tensions have eased starting with the end of 2019 when Beijing and Washington reached consensus over a phase one trade deal. The document was signed earlier this week, prompting stock markets to update peaks.
Louis Kuijs of Oxford Economics in Hong Kong said that stabilization of China’s economic growth was apparently sustainable. He said:
“We have seen improvement in industry. We have seen efforts (from policymakers) to make sure the economy continues to grow, especially efforts in the financing of infrastructure.”
Indeed, several indicators showed signs of improvement, especially an unexpected increase in factory output and investment.
China’s industrial output grew 6.9% last month compared to December 2018, the strongest pace in nine months. Economists anticipated growth to slow to 5.9% from 6.2% in November.
Fixed-asset investment increased by 5.4% for 2019, versus expectations for a 5.2% increase.
Retail sales rose 8.0% last month year-on-year, after a similar performance in November. Analysts expected the indicator to increase by 7.8%.
Elsewhere, the pound has been under pressure after the Bank of England gave clear signals that it might cut the interest rate for the first time since 2016. A recent poll carried out by Reuters shows that 60 out of 68 economists expect the central bank to hold rates steady at the next meeting, but the chance for a rate cut increased considerably.
Investec’s Victoria Clarke commented:
“In recent days there has been heightened focus on the possibility that the Bank of England might opt to cut the 0.75% Bank rate over the coming months and perhaps even as soon as January 30.”
