AUD to GBP Rate: Australian Dollar Dips Against the Pound as Chinese Manufacturing Data Dominates Other Issues

Increase in Risk Appetite Helps Support the Australian Dollar

The Australian dollar dipped versus the Pound again to trade at the support levels of early-February. The AUD v GBP rate was trading 0.57% lower at 0.5060 on the day as traders ignored global headlines to focus on slowing Chinese manufacturing data.

The February release of China’s PMI Manufacturing data showed the sector had slowed at the fastest rate since the depths of the financial crisis in 2009, which raised fears that Australia’s economy will be hit by a prolonged slowdown in China.

Chinese Production Still a Headwind for Australian Dollar Outlook

China’s manufacturing picture slowed as expected as large parts of the country, including key manufacturing regions, have been on lockdown in order to contain the Coronavirus. The February PMI data came in with a reading of 47.4, which was not as bad as some analyst’s expected, but it was still the sharpest contraction in ten years. Reports on Wednesday also noted that small and medium-sized businesses were operating at only 38.2% of capacity. Fears of a prolonged slowdown in China will dominate their economic releases in the next weeks and months, which could be a continued headwind for the Australian currency outlook.

The economic calendar has been light for the Aussie and the Pound this week, so the market has continued with the recent trend of positive U.K. data versus fears over Australian growth. This trend could change next week as the Australian economy releases its GDP figure on Wednesday, whilst the Reserve Bank of Australia will announce its latest interest rate decision a day earlier. The AUD to GBP may hover around this support level until next week’s data.

Coronavirus and Trade Talks Still Doubts for the Pound

The U.K. is still seeing new cases of the Coronavirus, but these have been minimal so far. Investors will still be watching headlines carefully to gauge the potential of a further spread that could harm the economy in the U.K., or with its key trading partners in Europe.

Britain’s trade talks with the EU will also dominate headlines in the coming months as the two sides sit down to attempt to strike a mutually beneficial Brexit deal. The U.K. and the EU have until June to agree an outline to a trade deal, so this could be a key driver of the Pound currency outlook approaching that deadline.

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