Pound to Australian Dollar (GBP/AUD) Exchange Rate Dips Despite PM’s Reassurance

July 17, 2020 - Written by John Cameron

STORY LINK Pound to Australian Dollar (GBP/AUD) Exchange Rate Dips Despite PM’s Reassurance

GBP/AUD Exchange Rate Falls as Fears Over British Unemployment Remain

The Pound to Australian Dollar (GBP/AUD) exchange rate dipped by -0.2% today, with the pairing currently trading around AU$1.796.

Sterling fell against the Australian Dollar (AUD) today despite Prime Minister Boris Johnson’s announcement that he hopes for a ‘return to normality, possibly in time for Christmas’.
However, many GBP investors are remaining cautious as anxiety grows over UK-EU post-Brexit negotiations.

Adam Cole, Senior FX Strategist at RBC Capital Markets, commented:

‘We remain structurally bearish. Activity data have generally disappointed this week, but as the data flow dries up ... expect Brexit to come back to the fore as a driver of GBP.’

Meanwhile, GBP investors are becoming more wary of Britain’s economic future, with yesterday’s jobs figures leading to concerns over increasing unemployment in the months ahead. According to the Office for National Statistics (ONS) unemployment rose by 34,000 in April to reach 1.3 million.

Resolution Foundation chief economist Mike Brewer said:

‘Unemployment is forecast to hit 4 million for the first time ever. And yet our official data is failing to show the true extent of this jobs crisis.’

Today saw a glimmer of hope for the British economy, however, after the Bank of England’s (BoE) Governor, Andrew Bailey, suggested that the economy is recovering.

Australian Dollar (AUD) Edges Higher as Investor Outlook for Global Economy Improves

The Australian Dollar (AUD) headed higher today despite growing concerns over US-China trade tensions. This follows several reports that relations between the two superpowers was at an all-time low.

Former official to Barack Obama, Danny Roswell, warned:

‘The US-China relationship is certainly in a sharp downwards spiral and it's getting worse, worse frankly than I think I've seen certainly since 1989.’

As a result, ‘Aussie’ traders are concerned that China – Australia’s largest trading partner – could enter conflict with the US. As a result, this has dampened risk sentiment as investors begin to steer clear of risky assets.

Nevertheless, the Australian Dollar (AUD) has been supported by yields and resilient stocks on improved investor outlook for the global economy.

Investors are beginning to suspect that economies will rebound quickly once Covid-19 restrictions are eased, so this has fed into a demand for risky assets like the Australian Dollar today.

GBP/AUD Outlook: RBA Governor Speech and Australian Retail Sales in Focus

Australian Dollar (AUD) investors will be looking ahead to Tuesday’s speech from the Reserve Bank of Australia’s Governor, Philip Lowe. Any dovishness about the Australian economy’s ability to recover from the pandemic would prove AUD-negative.

Meanwhile, Wednesday will see the release of Australia’s Retail Sales figures or June. If these improve, then we could see the ‘Aussie’ head higher.

The GBP/AUD exchange rate will remain sensitive to Brexit developments next week. Any signs of a compromise between the UK and the EU would boost Sterling.

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