China’s economy slowing due to Covid

Whilst those in the UK, took a well-earned three-day break, the rest of the world carried on regardless. (That makes a good film title doesn’t it).

Yesterday, we got the news that China’s economy slowed significantly in August as outbreaks of the Covid Delta variant stifled consumer activity and supply chain concerns & rising raw material prices hampered production.

USD weakened by flagging housing data

At the same time, a drop of 1.8% in the US pending home sales knocked the US Dollar. The GBPUSD rate hit the highest level in a fortnight at $1.38 and is only just below that this morning. The EURUSD rate followed the same pattern, topping out above $1.1830 and still sitting at $1.1825 this morning. USD traders will be awaiting Friday’s US employment data with keen interest.

AUD and NZD boosted by USD weakness

That USD weakness has also flattered the Aussie and Kiwi Dollars, despite the negative data coming from China; a major export market for Australasia. GBPAUD is down to AUD 1.88 this morning. It has been a tad lower overnight but there have been sufficient GBP buyers throughout August to support the GBPAUD rate here. Any break below this risks a run down to AUD 1.85. Australian GDP data is due for release overnight tonight and, if the forecasters are right, that will delay any further AUD strength.

GBPNZD is down to the lowest level we have seen since early June, despite a slump in the ANZ business confidence index to minus 14.2. That’s the worst reading since November 2020. At this morning’s NZD 1.9525, this pair is poised to suffer further losses. The next target, if NZD 1.95 doesn’t support this pair, is NZD 1.9330 and perhaps even NZD 1.9180, if that doesn’t hold. There is a lot of caveat to this though; covid, lockdowns, Chinese demand etc.

The GBPEUR exchange rate is a sea of calm compared to the aforementioned currency pairs. GBPEUR is trapped in a range between €1.16 and €1.18 and has a medium-term support line at €1.1600 as well. So it will take something substantial to shift the dial, as they say. The only data that could do that today is EU inflation data but that is unlikely to shift ECB sentiment.

CAD should gain on Canadian GDP

This afternoon delivers Canada’s economic growth data. GBP growth of 0.7% on the month is forecast. That ought to lift the annual rate of growth and the GBPCAD rate, which is at its mid-range point of CAD 1.7350 this morning, may well try to catch up with the AUD and NZD in strengthening against the Pound.

That brief round-robin sets us up for the last day of the month and a short working week for UK traders. Have a great one.

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