AUDGBP: AUD to GBP jumps as China trade bounces back in April

The AUD/GBP pair rose today after China released its trade numbers for April and ahead of the BOE interest rate decision.

China trade numbers

In a report by the Chinese trade ministry, the country said that its exports volume jumped by 3.5% in April. This was the first time the number has increased this year. In March, the volume of exports declined by 6.6%. Also, the median estimate of analysts polled by Reuters was a 15.7% decline.

At the same time, imports declined by more than 14.2% in the month. This was worse than the expected decline of 11.2% and the previous decline of 1.0%. As a result of higher exports and low imports, the trade balance soared to a YTD high of $45.3 billion.

The numbers showed that activity in China was improving, which is a good thing for the Australian economy. This is because the country sells most of its goods like copper, coal, and iron ore to China.

Part of the reason why imports declined is that big airline manufacturers like Airbus and Boeing did not ship a lot of planes to China. In addition, with the price of crude oil being at historic lows, it means that the country paid less to buy oil.

AUDGBP eyes BOE interest rate decision

The AUDGBP pair also rose as the market waited for the BOE interest rate decision. The bank is expected to leave rates unchanged at the current historic low of 0.25%. Moving lower than this would lead to speculations of negative interest rates.

Also, the bank is expected to leave its 200 billion pounds quantitative easing program intact because it does not need to commit to anything in the today’s meeting. This is because the because it is buying assets worth more than 18 billion pounds per month and it has about 100 billion left. Therefore, it could commit to increase in the meeting in June.

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AUD to GBP technical outlook

On the four-hour chart, we see that the AUDGBP pair has been on an upward trend since bottoming at 0.5116 on Monday this week. The price has moved above the Ichimoku cloud and is above the 23.6% Fibonacci retracement level. It is also a few pips below last month’s high of 0.5265. Therefore, I expect the pair to continue rising ahead of the BOE rate decision as bulls attempt to retest the previous high.

On the flip side, this thesis will be invalidated if the pair moves below the 23.6% retracement level at 0.5150. This action will send a signal that there are more sellers in the market, who may want to see the price move below Monday’s low of 0.5116.

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