This update examines factors that could affect AUD exchange rates this week. The below table displays the difference in Australian Dollars you would have achieved when buying £200,000 during trading yesterday.
|Currency Pair||% Change||Difference on £200,000|
Worrying signs for China’s economy emerged this morning as latest set of Purchasing Managers Index data was worse than expectations, coming in at 49.6 for the month of May compared to the estimated 50.1 estimated and the 50.3 previously. A reading above 50 signals expansion within the industry and a reading below 50 signals contraction. This could potentially spell long term weakness for the Aussie.
The reason why this influences the Australian Dollar is that China is Australia’s largest trading partner. If the economy in China appears to be on the up, it will require more resources to support its economy. As a major producer of Iron ore and other raw materials which are required and used by the Chinese, if the economy appears to improve so does the AUD. This morning’s data release means that less factories are producing and therefore a need for raw materials is decreasing.
This data is contrast to the official Chinese figures the day before which actually showed an increase in the sector, however the Caixing report focuses on small to medium sized businesses and not the larger state funded manufacturers. Analysts are claiming this to be worrying signs for the Chinese and therefore could spell medium to long term weakness for the Aussie.
Retail Sales Data
Domestically, things down under aren’t as bad as their largest trading partner. Retail sales jumped a massive 0.7% above what was predicted and gave the Aussie a short time spike this morning. Currently, the general election is weighing heavily on the GBPAUD as investors look for safer currencies such as the Euro and the USD and take their investments away from risker currencies such as the AUD. Economic data releases such as this morning can provide short term windows of opportunity. Get in touch to find out how to capitalise.
For more information on how future data releases could affect your Dollar requirement, please feel free to get in touch here.