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Pound Australian Dollar (GBP/AUD) Exchange Rate Rises despite Upbeat RBA Lowe

August 14, 2020 - Written by John Cameron

Pound Australian Dollar (GBP/AUD) Exchange Rate Falls as Aussie Unemployment Rate to Hit 10%

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate made slight gains at the end of the week, leaving the pairing trading at around AU$1.8327.

The Australian Dollar remained flat today after Reserve Bank of Australia (RBA) Governor, Philip Lowe said policymakers had no concerns about the stability of the bank’s system.

Lowe noted:

‘I don’t have any concerns about the stability of the banking system at all. The banks went into this episode with the highest level of capital. They’re in a strong position to provide the credit the country needs.’

This comes as Australia saw its unemployment rate rise to a 22-year high and millions of Dollars in loans were deferred. The unemployment rate is also expected to hit 10% this year and wage growth is crawling along at its weakest pace on record.

These comments came as Commonwealth Bank of Australia reported close to 20,000 of its mortgages are held by people claiming unemployment benefits due to the coronavirus crisis.

The RBA’s governor also added:

‘The solution to most problems we face is kind of creating jobs, and ... it’s aggregate demand and environment that’s conducive to hire people and income support so that’s the solution if you’re worried about loan deferrals.’

Sterling (GBP) Gains as Britain Eases Further Lockdown Measures

The Pound edged higher on Friday despite Britain announcing it would implement quarantine measure on travellers returning from France from Saturday.

This came after France’s Prime Minister said the country’s infection numbers were going ‘the wrong way’ and warned they would take ‘reciprocal measures’.

Britain’s Transport Secretary Grant Shapps said the reason for the measures was due to the rate of infection rising above 20 cases per 100,000 people.

Speaking to BBC Breakfast, Shapps said:

‘We've worked so hard in this country to get our level of infections down, the last thing we want do is to have people returning and bringing the infection with them. It's to protect everybody.’

This dealt a new blow to the travel industry, although Britain cannot afford another coronavirus-induced contraction after the 20% slump in the second quarter.

Added to this, GBP received a boost of support after Prime Minister Boris Johnson ordered the reopening of the economy in England to continue.

Johnson noted that the rise in infections that caused the reopening to be paused two weeks ago had now levelled off. He also warned there would be harsher punishments for those who breach the remaining coronavirus restrictions in place in England.

Pound Australian Dollar Outlook:US-China Trade and Brexit in Focus

Looking ahead to this weekend, traders will be focused on the latest meeting between US and Chinese officials over the Phase 1 trade deal.

If the meeting is a success, and Washington and Beijing recommit to the deal it will cause risk appetite to rise. This will offer the risk-sensitive Australian Dollar (AUD) support against the Pound (GBP).

Although, attention is likely to turn back to Brexit next week. A jump in Brexit optimism will boost Sterling and will leave the Pound Australian Dollar (GBP/AUD) exchange rate largely flat.

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