May 20, 2020 - Written by John Cameron
STORY LINK Pound to Australian Dollar (GBP/AUD) Exchange Rate Falls on Positive Risk-Sentiment
GBP/AUD Exchange Rate Sinks as Covid-19 Vaccine Hopes Boost ‘Aussie
The Pound to Australian Dollar (GBP/AUD) exchange rate fell by -0.4% today, with the pairing currently trading around AU$1.866.
The Australian Dollar (AUD) continued to be buoyed by a growing sense of market confidence today, with the US Dollar being under pressure and European markets reopening following the peak of the coronavirus crisis boosting risk-on mood.
Hopes of a coronavirus vaccine have also contributed to the ‘Aussies’ ascent today. Several large biotech companies, including the US-based Moderna, claimed that their first human trials had produced signs of an antibody.
However, Australian Dollar investors are remaining cautious as China considers targeting more Australian exports with tariffs. Beijing has already added 80% tariffs on barley and included restrictions on meat from some of Australia’s largest producers.
With China being Australia’s largest trading partner, this has caused some concern over the health of the Australian going forward into this year.
In Australian economic data, later this evening will see the release of the flash Australia’s Commonwealth Bank Services PMI for May. Any signs of this falling deeper into contraction territory would prove AUD-negative.
Pound (GBP) Falls as UK Inflation Drops to 0.8%
The Pound (GBP) suffered from weak inflation today, with April’s CPI report falling to just 0.8%, far from its target of 2%.
Jeremy Thomson-Cook, the chief economist at Equals Group, commented:
‘As we have noted in the past, you need to have demand to create inflation and, for now, there is little demand. Some will return as employees earnings recover and more businesses reopen allowing consumers to spend more on different sectors but, similar to the pace of the economy reopening, is likely to be slow.’
Meanwhile, Sterling traders have remained cautious about the UK economy after Chancellor Rishi Sunak warned that there was no guarantee of an economic bounceback.
Mr. Sunak also warned of a ‘recession like we’ve never seen’ following the record spike in UK jobless claims yesterday.
As a result, the Pound (GBP) has remained subdued today as the UK’s economic outlook continues to darken amid the coronavirus crisis.
However, Pound (GBP) traders are becoming more hopeful that the UK could begin to control its Covid-19 crisis, with a tracing system ready to begin from June 1st.
GBP/AUD Forecast: Sterling to Suffer as UK PMI Expected to Remain Downbeat
Australian Dollar (AUD) traders will be awaiting tomorrow’s speech from the Reserve Bank of Australia’s Governor, Philip Lowe. However, if he simply reiterates the bank’s holding of interest rates and maintaining a wait-and-see approach, this could have little affect on the ‘Aussie’.
Meanwhile, Australian Dollar investors will be paying close attention to Australia-China relations. If China continues to place tariffs on Australian exports, however, we could see the AUD/GBP exchange rate begin to drop.
The GBP/AUD exchange rate is likely to remain subdued tomorrow, with the flash UK Services PMI for May likely to remain lodged on contraction territory.
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