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Pound Australian Dollar (GBP/AUD) Exchange Rate Falls as Victoria’s Covid-19 Outbreak Eases

August 19, 2020 - Written by John Cameron

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Slumps as Aussie Covid-19 Outbreak Eases Further

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped by around -0.5% on Wednesday morning. This left the pairing trading at around AU$1.8183.

The Australian Dollar edged higher today as the new outbreak in the country’s coronavirus hotspot, Victoria, eased further.

In the past 24 hours there were 12 deaths and just 216 new cases, down from around 700 infections just two weeks ago.

Added to this, the currency received a further boost on the news of a deal to secure a coronavirus vaccine. The vaccine would be rolled out cost-free to Australian citizens.

Late on Tuesday, Aussie Prime Minister Scott Morrison said the country had signed a deal with British drugmaker, AstraZeneca. The deal is to produce and distribute enough doses of a potential Covid-19 vaccine for the country’s 25 million citizens.

Speaking on Wednesday, Morrison noted:

‘Should we be in a position for the trials to be successful, we would hope that this would be made available early next year. If it can be done sooner than that, great.’

Last month, AstraZeneca said good data was coming in so far on the vaccine, which is already in large-scale human trials.

Pound (GBP) Slides as Jump in Inflation Expected to be Temporary

Sterling fell against the Australian Dollar after the latest UK inflation rose unexpectedly last month. July’s consumer prices increased to a higher-than-forecast 1% from June’s 0.6%.

The Consumer Price Index (CPI) rose to the highest level since March as clothing shops refrained from the usual summer discounts.

The data from Office for National Statistics (ONS) showed clothing and footwear were the largest contributors to inflation in July.

Added to this, the ONS revealed core inflation hit its highest level in a year, rising from June’s 1.4% to 1.8% despite analysts expecting it to fall back to 1.3%.

However, Sterling struggled as the jump in inflation is expected to be temporary. Headline inflation is expected to fall back next month as the various measures announced by Chancellor, Rishi Sunak take effect.

According to Capital Economic’s Ruth Gregory:

‘The rise in clothing inflation may reflect retailers delaying summer discounting, as non-essential stores reopened in the middle of the month. Retailers may need to do more to entice people through the doors in the coming months. And food price inflation may continue to fall back as the re-opening of restaurants and cafes causes demand for supermarket food to decline.

‘What’s more, in August, the effects of the cut in the VAT rate for hospitality/tourism on 15th July (prices were collected on 14th July so this won’t be captured until August’s data) and August’s “Eat Out to Help Out” (EOHO) restaurant discount scheme will kick in. If 50% of eligible businesses pass on the VAT cut and 50% participate in the EOHO scheme, then inflation may fall by 0.7ppts. If the pass-through of both the VAT cut and the EOHO scheme is 75% rather than 50%, then inflation may be 1.1ppts lower than otherwise.’

Pound Australian Dollar Outlook: Brexit Talks Back in Focus

Looking ahead, the Pound (GBP) could claw back some losses against the Australian Dollar (AUD) following the release of latest Industrial Trends Orders from the Confederation of British Industry’s (CBI).

If orders increase more than expected in August, it will offer Sterling an upswing of support.

Meanwhile, traders will also be focused on the latest round of post-Brexit trade negotiations between the UK and European Union. Ahead of the talks a European Commission spokesperson noted a deal would have to be agreed by October ‘at the latest’.

If the seventh round talks continue to progress well, it will offer Sterling further support and could reverse today’s losses and send the Pound Australian Dollar (GBP/AUD) exchange rate higher.

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