GBP/AUD recovers Thursday losses, updating the highest level since the summer of 2016. Currently, the pair is trading at 1.9696, up 0.44% as of 6:30 AM UTC. Earlier in the morning, the price hit a daily peak at 1.9779.
The sterling advances on increasing confidence among British households and optimism that the UK and the European Union would reach a trade deal by the end of this year. Elsewhere, the Aussie has been under pressure after China reported that its manufacturing sector had dropped at the fastest pace since the financial crisis in 2008.
China’s Manufacturing Activity to Lowest in Over 10 Years
Recently, China published its manufacturing purchasing managers index (PMI) expectations, according to which the indicator would tumble to 46, the lowest since January 2009. In January, the indicator stayed at 50, which separates growth from contraction.
China is Australia’s largest trade partner and source of tourists. Its economy was hit by the coronavirus outbreak, which has killed 2,788 people and infected more than 79,000, especially in the Hubei province.
Nomura anticipates China’s economic growth in the first quarter to be at 2.0% in annual terms, while Capital Economics expects that the economy would contract for the first time since the 90s.
The Reserve Bank of Australia (RBA) will likely maintain the interest rate at a record low at 0.75% in March, but economists expect two further cuts later this year. A Reuters poll showed that 29 out of 35 economists expect the first rate cut of the year to be decided before June. 18 of 35 respondents expect a second cut by year-end as well.
GBP Supported by GfK Data
Elsewhere, the pound increases after market research firm GfK said that UK consumer confidence index rose for the third consecutive month, to -7 from -9 in January. Analysts expected a rise to -8.
Joe Staton, client strategy director at GfK, commented:
“The rise in the overall index score is driven by our increasingly positive view on the state of the UK’s general economy for both the past and the next 12 months.”
Investors also hope that the UK and the EU would reach consensus on the trade deal. Yesterday, Prime Minister Boris Johnson told Sky News that he was very optimistic about the negotiations.