June 15, 2020 - Written by John Cameron
STORY LINK Pound to Australian Dollar (GBP/AUD) Exchange Rate Edges Higher as UK Non-Essential Shops Reopen
GBP/AUD Exchange Rate Rises on Dampened Risk Sentiment
The Pound to Australian Dollar (GBP/AUD) exchange rate rose by 0.2% today, with the pairing currently trading around AU$1.83. Sterling has benefited from the reopening of England’s non-essential shops, with hopes growing over Britain’s’ economic recovery.
However, forecasts for the UK economy’s downturn have held back some of the Pound’s gains today. This follows the EY Item Club’s downgrading of its economic prospects for the nation, with a full recovery for the economy expected in 2023.
Howard Archer, the group’s chief economic adviser, commented:
‘Many people have lost their jobs despite the government’s supportive measures. This will inevitably have some limiting effect on the economy’s recovery.’
GBP has benefited from further hints that Downing Street could be considering easing the Covid-19 2-metre distance guidelines.
Chancellor Rishi Sunak recently commented:
‘Now that we have made good progress in suppressing the virus, we’re at a different stage of this epidemic than we were at the beginning, and that enables us to take a fresh look at this.’
As a result, Sterling traders are becoming hopeful that the distancing rules could be scrapped as this would directly benefit the UK’s retail sector. Furthermore, with distancing rules abandoned the UK economy could begin to reopen other affected sectors like construction and manufacturing.
Australian Dollar (AUD) Steady as Chinese Economic Gloom Weighs on ‘Aussie’
The Australian Dollar (AUD) has been hit by growing concern for the Chinese economy after it was revealed that Beijing had experienced new cases of Covid-19. As a result, ‘Aussie’ investors are becoming worried that China – Australia’s largest trading partner – could be facing another wave of the coronavirus.
Meanwhile, Chinese economic data has also pointed to a slow recovery and a hard road ahead for the global economy.
Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings, commented:
‘China’s experience so far suggests that it will be a hard road back for the global economy.’
‘We still expect a rebound in the second half, but expectations for a surge in pent-up demand may be disappointed.’
Consequently, Australian Dollar (AUD) investors are becoming increasingly concerned that this could have a knock-on affect on the Australian economy. Furthermore, investors are flocking back to safe-haven currencies as the global economic situation continues to deteriorate.
GBP/AUD Outlook: Could Easing UK Covid-19 Lockdown Measures Boost Sterling This Week?
Australian Dollar (AUD) investors will be looking ahead to tomorrow’s release of Australia’s Westpac leading index for May. Any signs of improvement would prove AUD-positive.
Tomorrow will also see the release of the Australia HIA New Home Sales figure for April. However, with gloomy forecast this is unlikely to boost the Australian Dollar.
Instead, the AUD/GBP exchange rate will remain dictated by risk-sentiment this week. As a result, any signs of improvement in China’s economy would benefit the ‘Aussie’.
The GBP/AUD exchange rate could edge higher this week as the UK’s non-essential retail shops reopen. Any further signs that Downing Street could further ease Covid-19 lockdown measures would also prove GBP-positive.
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TAGS: Australian Dollar Forecasts Pound Australian Dollar Forecasts