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Pound Australian Dollar (GBP/AUD) Exchange Rate Falls as Covid-19 Vaccine Hopes Boost ‘Aussie’

July 13, 2020 - Written by John Cameron

GBP/AUD Exchange Rates Sinks as ‘Aussie’ Receives Boost From Improving Risk Sentiment

The Pound to Australian Dollar (GBP/AUD) exchange ratel fell by -0.5% today, with the pairing currently trading around $1.80.

The Australian Dollar (AUD) benefited today from growing hopes of a possible vaccine for Covid-19. As a result, risk-sentiment improved as optimism over the global economy’s recovery increased.

Scott Gottlieb, the former commissioner of the Food and Drug Administration (FDA), was more cautious, tweeting:

‘This is very encouraging but needs to be confirmed in a prospective trial.’

Meanwhile, rising iron ore prices have also buoyed the ‘Aussie’ today. Iron ore shipments from Port Hedland – in Western Australia – increased by 7% month-on-month and 19% year-on-year to 46mt in May.

Consequently, investors are becoming more positive that Australia’s economy could be on the road to recovery.

Roberto Mialich, a currency strategist at UniCredit Bank, commented:

‘Currencies are still playing to the tune that has dominated over the past few weeks, i.e. a continued struggle between global risk aversion and global risk appetite. The latter prevails in the end over risk-off sentiment, but this is not a straight road. Concerns about the COVID-19 pandemic – new cases are steadily rising in the US; Melbourne has just announced another six-week lockdown – are still preventing risk-on sentiment from spreading much more across markets and currencies.’

Pound (GBP) Falls Despite Bullish Comments from the Bank of England

The Pound (GBP) failed to gain today despite Andrew Bailey, the Governor of the Bank of England (BoE), reassuring some Sterling investors that the British economy is on the road to recovery.

Mr Bailey commented:

‘We are seeing the economy come back now somewhat, because obviously the restrictions are beginning to be lifted.’

‘But there’s a long way to go, we are very worried about jobs, as are a lot of people.’

Meanwhile, concerns have been growing over the UK’s retail sector after the Institute of Directors (IoF) reported that foot fall had significantly fallen in June. Consequently, investors have become worried that the retail sector could continue to struggle in the months ahead.

Diane Wehrle, insights director at Springboard, commented:

‘Long queues coupled with a restricted shopping experience due to social distancing could be the contributing factors to this sudden drop off in footfall.’

GBP/AUD Outlook: Could an Improvement in the UK’s Industrial Sector Boost Sterling?

GBP investors will be looking ahead to tomorrow’s release of the industrial and manufacturing production data for May. Any improvements would prove Pound-positive as hopes grow for Britian’s economic recovery.

Tomorrow will also see the release of the UK’s GDP figure for May. If this confirms consensus and rises by 5%, we could see the GBP/AUD exchange rate begin to gain some ground.

Australian Dollar (AUD) investors will be looking ahead to tomorrow’s release of the National Australia Bank’s Business Conditions report for June. If this remains in negative territory, we could see the ‘Aussie’ shed some of its gains.

The GBP/AUD exchange rate will remain sensitive to risk-sentiment this week. If hopes for the global economy’s recovery grow, then we would see the Australian Dollar continue to edge higher.

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