The AUDGBP exchange rate is 0.17% higher on Friday after the release of PMI data for the Australian economy was strong. The UK has seen its own data releases with stronger retail sales countering the higher government spending. Britain’s latest PMI data will also come later this morning and that should set the tone for the rest of the session.
The AUD to GBP trades at 0.5580 after the Aussie dollar slipped below 05600 level again this week.
Australia trade spat with China looms again
Australia’s parliament may have reignited the trade spat with China after they approved the government’s right to review foreign deals made some of its states and universities last year. Yesterday, it was announced that the foreign minister would be cancelling four deals, two of which had been negotiated by Victoria in line with the China Belt Road plans.
Australia was critical of the Chinese government last year during the Huawei 5G issue, their treatment of Hong Kong, and the origins of the coronavirus This saw China retaliate with tariffs on Aussie imports and it is a bit risky to rattle the buyer of 30% of your country’s exports. Beijing was unhappy at the unwinding of the trade deals.
The move by parliament threatens to see further action from Beijing and could hamper the Australian currency’s ability to rebound in the months ahead. Exports have been a key driver for the country’s performance as one of the strongest recoveries from the virus fallout. This was helped by low case numbers in down under and the lack of any second or third wave in China.
PMI data will set the tone for Friday’s price action
Australia’s manufacturing and services PMIs both came in better than expected, with the former coming in at 59.6, while the latter was 58.6. The country has seen a strong jobs market and rising house prices has lifted consumer and business confidence.
For the UK, its own Gfk consumer confidence number today was lower than expected with a reading of -15 compared to -12 for the month of April. Government borrowing was higher for the British economy at £28bn, compared to the expectations for £22.5bn.
UK public sector borrowing has now hit £303bn for the year to March and is the highest level since the end of World War Two, according to the ONS. The Office for National Statistics added that tax receipts and National Insurance contributions had also slumped by a further £28bn for the month.
Markets will now await the latest PMI figures from the UK with market expectations being high at 58.2 for manufacturing and 59 for the services figure.
The AUDGBP trades between the 0.5550 and 0.5600 levels and will likely break from this range. The Australian dollar has seen an advantage with its all-round economic outlook, but the house price gains and China trade arguments are a risk for the Aussie.