Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks as Risk-On Markets Boost ‘Aussie’

July 3, 2020 - Written by John Cameron

STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks as Risk-On Markets Boost ‘Aussie’

GBP/AUD Exchange Rate Dips as Chinese Services PMI Beats Expectations

The Pound to Australian Dollar (GBP/AUD) exchange rate dipped by -0.3% today, with the pairing currently trading around AU$1.79.

The Australian Dollar (AUD) has benefited from better-than-expected retail sales figures today, with sales rising by 16.9% in May. As a result, ‘Aussie’ investors are becoming increasing hopeful that Australia’s economy could be on the way to recovery.

Ben James, Director of Quarterly Economy Wide Surveys, commented:
‘The gradual easing of social distancing regulations, and the re-opening of physical stores, bolstered retail trade in May.’

‘Retailers across a range of industries reported high numbers of consumers returning to stores, with some retailers noting levels similar to those seen in December.’

Today also saw the risk-averse ‘Aussie’ benefit from stronger-than-expected Chinese services PMI. Consequently, investors are more hopeful that the improvement in the world’s second largest economy could boost Australia’s economy in the months ahead.

With China being Australia’s largest trading partner, signs of an improving Chinese economy have proved AUD-positive today.

Pound (GBP) as the UK Services PMI Fails to Impress Markets

The Pound (GPB) fell today following the release of the final UK Services PMI for June, which rose from 47 to 47.1. However, with the British economy still underperforming, this failed to uplift Sterling.

Tim Moore, Economics Director at IHS Markit, commented on today’s report:

‘The latest UK Services PMI data highlighted another steep decline in employment numbers, despite a rebound in business expectations for the year ahead. Service providers widely commented on fears of a slow recovery in customer demand and an immediate need to reduce overheads. Moreover, survey respondents often noted the high cost of adapting operations during the COVID-19 pandemic, coupled with constrained business capacity and difficulties passing on rising expenses to clients.’

Meanwhile, post-Brexit concerns are also weighing on the Pound after Michel Barnier – the Eurozone’s chief Brexit negotiator – bemoaned the UK’s lack of engagement in UK-EU trade negotiations.

Consequently, traders are feeling increasingly concerned about the UK’s economy post-coronavirus and post-Brexit, with a great deal of uncertainty still on the horizon.

GBP/AUD: Outlook: Could Positive Australian Inflation Boost the ‘Aussie’?

Australian Dollar (AUD) investors will be awaiting Monday’s release of the latest TD Securities inflation figures for June. Any signs of improvement would benefit the ‘Aussie’.

Meanwhile, the Australian Dollar will remain sensitive to risk-sentiment next week. If coronavirus infections worldwide show any signs of dropping, we could see the AUD edge higher.

Sterling investors will be keeping a close eye on Monday’s release of the UK’s Markit Construction PMI for June. Any indications that the UK’s construction sector could be on the mend would boost the Pound.

The GBP/AUD exchange rate will also remain sensitive to Brexit developments and the UK’s own coronavirus crisis. Any signs that the UK-EU trade negotiations could forward a possible free trade deal, then we could see the pairing rise.

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TAGS: Australian Dollar Forecasts Pound Australian Dollar Forecasts