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Pound Australian Dollar (GBP/AUD) Exchange Rate Falls as Market Still Risk-on despite ‘Historic’ Jobless Rate

June 5, 2020 - Written by John Cameron

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Slides as ECB Action Buoys Risk Appetite

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped by around -0.3% this morning. This left the pairing trading at around AU$1.8114.

The risk-sensitive Australian Dollar was able to make gains today after the European Central Bank (ECB) announced it would be expanding its stimulus.

The Euro (EUR) continued to make gains on Friday morning, which pushed the safe-haven US Dollar (USD) towards a three-month low and offered riskier assets such as the ‘Aussie’ support.

The Australian Dollar was able to make gains this week, and against USD hit a five-month high on Thursday.

Markets were offered a further boost after yesterday’s US jobless claims showed the number of Americans filing for unemployment fell below two million.

This was the first time the figure has eased below two million since mid-March, although the joblessness continues to be unprecedently high compared to the peak hit during the global financial crisis.

Traders will now focus on Friday afternoon’s US non-farm payrolls and unemployment data. Unemployment in the world’s largest economy is expected to hit levels last seen during the 1930s Great Depression.

According to State Street Bank’s Tokyo Branch Manager, Bart Wakayabashi:

‘The market is risk-on despite historic levels of jobless rate. But everyone is still wary that the mood could change, and putting tight stop-loss orders. There is no strong conviction.’

Sterling (GBP) Tumbles as Confidence Nears All-Time Low

The Pound edged lower against the ‘Aussie’ today after data revealed sentiment amongst British consumers slumped to its lowest level since the global financial crisis last month.

Data from GfK showed confidence plummeted in May as consumers were worried about a rise in unemployment and falling house prices due to Covid-19.

Confidence tumbled to -36 in the second half of May, after GfK reported sentiment slumped to -34 in the first two weeks of the month. This weighed on GBP as this was not far from an all-time low of -39 hit in July 2008.

Commenting on the latest confidence data, client strategy director at GfK, Joe Staton said:

‘With no sign of a rapid V-shaped bounce-back on the cards, consumers remain pessimistic about the state of their finances and the wider economic picture for the year to come.

‘As the lockdown eases, it will be interesting to see just how the consumer appetite for spending returns in a world of socially-distanced shopping and the seismic shift to online retailing.’

Pound Australian Dollar Outlook: Brexit Negotiations in Focus

Looking ahead, the main focus for Sterling (GBP) this afternoon is likely to remain the ongoing post-Brexit trade negotiations between the UK and European Union.

The latest round of Brexit talks is set to enter the final day with reports so far suggesting that both sides gave reached yet another impasse.

Traders will be eyeing headlines today, to see whether there will be a last-minute breakthrough in discussions between London and Brussels.

Any optimistic reports today suggesting the UK is likely to compromise on key issues and news negotiations continue to move forward will support GBP. This is likely to send the Pound Australian Dollar (GBP/AUD) exchange rate higher.

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