Reverse in fortunes as Australian dollar exacts a swift return to form against the pound sterling courtesy of Chinese GDP stats

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Category: Australian Dollar News

Written by Will Peters

International Money Transfers at our sister site

"Markets might be positive on the below-consensus 7.6% second-quarter GDP growth reading as markets are forward looking on a coming growth rebound and more policy easing measures" - Bank of America-Merrill Lynch.

The pound has fallen back against a resurgent Australian dollar (Currency:AUD) this morning.

At 10 AM in London the GBP-AUD rate is 0.2 pct in the red at 1.5193. The AUD-USD rate is 0.32 pct higher at 1.0170.


This morning's move higher for the Australian currency are in sharp contrast to yesterday's drubbing on the back of poor employment market statistics. More on that here Australian employment data not disastrous say ANZ Bank, but the foreign exchange markets don't agree.

Today the key driver for the AUD has been the latest GDP figures out of China - the all-important engine of commodity prices which form a key component of the Australian economy.

It was shown that China’s economic growth fell to 7.6% year-on-year in the second quarter, its slowest pace in three years. However, this performance was entirely expected by economists who will be glad growth didn't slow any further.

Indeed, it would seem investors are betting that the Chinese authorities will embark on a stimulus programme in response; an Australian dollar positive.

"Markets might be positive on the below-consensus 7.6% second-quarter GDP growth reading as markets are forward looking on a coming growth rebound and more policy easing measures," says a note from Bank of America-Merrill Lynch.

"The official growth target (7.5% for 2012) is typically thought to represent the lowest level that the government is comfortable with, and has often been surpassed by a wide margin. It has therefore been concerning for market participants to find few signs of re-acceleration in recent Chinese economic activity, which suggests that this year’s pace of growth could converge more closely with the official target than it has in a decade," says Jing Ulrich at J.P. Morgan.