- Pound (GBP) under pressure despite GDP upward revision
- Brexit concerns linger
- Australian Dollar (AUD) rises after Chinese manufacturing PMI expands for 7th months
- Australian manufacturing PMI due on Wednesday
The Pound Australian Dollar (GBP/AUD) exchange rate is continuing its march lower on Wednesday. The pair settled -0.5% lower on Tuesday at 1.8040 close to the low of the day. At 08:15 UTC, GBP/AUD trades -0.2% at 1.8003, towards the lower end of the daily traded range.
The final reading of the GDP for Q2 was unexpectedly revised upwards to -19.8%, up from -20.4%. The data revealed that the collapse in the economy during those lockdown months from April – June was not quite as server as initially feared. This higher base should have given the Pound a boost. The fact that it didn’t highlights the sterling’s weakness.
Brexit concerns continue to drag on the currency. Brexit trade negotiations continue. However, hopes are fading of the two sides entering a final intense period of talks which often see a deal closed.
Covid cases continue to climb sharply in the UK. Concerns are growing that tighter lockdown restrictions will be imposed in order to stem the spread of the virus. Liverpool could go into a two -week circuit breaker. Tighter lockdown restrictions could derail the fragile economic growth.
The Australian Dollar, also referred to as a China proxy, is charging higher on the back of upbeat Chinese manufacturing data. Official data revealed that Chinese factory activity continued to rebound in September thanks to improving exports amid strengthening overseas demand.
The manufacturing PMI rose to 51.5 in September, up from 51 in August. This was above the 51.2 expected and above the level 50 which separates expansion from contraction. The sector remains in expansion territory for a seventh straight month indicating that China’s vast industrial sector is well on its way to returning to pre-pandemic levels.
Looking ahead the risk sensitive Australian Dollar could be swayed by the US ADP private payroll report. Beyond that, Australian manufacturing PMI data is due to be released on Wednesday.