Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Slides as UK Economy Has a ‘Long Way to Go’
UPDATE: The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped by around -0.6%. This left the pairing trading at around AU$1.8059.
Sterling remained under pressure after Bank of England (BoE) Governor Andrew Bailey said that while he thought Britain was starting to recover, it had a long way to go.
He highlighted the risks and the downbeat outlook for jobs.
Speaking to school pupils during an online talk hosted by Speakers for Schools, Governor Bailey said:
‘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.’
Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Slide on Covid-19 Vaccine Hopes
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate edged around -0.3% lower. This left the pairing trading at around AU$1.8114.
Risk appetite continued to improve on Monday morning, following Friday’s rebound and solid performance thanks to positive signs of economic recovery. This comes despite the resurgence of coronavirus cases in the United States.
This week’s hopeful mood was buoyed after Gilead Sciences Inc reported its antiviral drug, remdesivir showed it reduced the risk of death in severely ill coronavirus patients.
While Gilead said clinical trials still need to be conducted it boosted hopes the global economy will return to normality.
David Madden of CMC Markets noted:
‘A study found that Remdesivir, an anti-viral drug produced by Gilead Sciences, reduced the fatality rate by 62%.
‘The drug in question has been tipped as a potential treatment for the coronavirus for several months, and the findings from the latest study boosted market sentiment.’
Optimism improved further after head of German biotech firm, BioNTech said that the vaccine being developed with Pfizer may be ready for regulatory approval by the end of the year.
Speaking to the Wall Street Journal, CEO Dr. Ugur Sahin said several million does could be produced prior to approval being granted.
Commenting on this, City Index’s Fiona Cincotta noted:
‘A study on Remdesivir showed that the drug reduced coronavirus fatalities by 62%. Boosting sentiment further Pfizer and BioNTech announced that their vaccine could be approved by the FDA as soon as December.
‘A vaccine is the quickest and surest way for the economy to bounce back to pre-corona levels, which explains why the market is so sensitive to any vaccine news flow.’
Sterling (GBP) Struggles as Traders Focus on Coronavirus
The Pound remained under pressure on Monday, sliding against the ‘Aussie’ as risk appetite improved.
The lack of economic data today means traders are likely to remain focused on the interplay between the rising coronavirus cases and the rebound in economic activity.
Traders are also eyeing the next round of official PMI data to see if activity in Britain’s service and manufacturing sectors picked up last month.
However, Sterling remained under pressure after a survey from accountancy firm BDO suggested that while the data was encouraging it was still below its lowest point of the global financial crisis.
According to Kaley Crossthwaite, partner at BDO LLP:
‘Although economic activity remains considerably suppressed, the recovery in output is an encouraging signal that the easing of restrictions has breathed life into certain sectors.
‘While output continues to show positive momentum, the crucial infrastructure underpinning the economy remains fragile. As government support measures are rolled back in the coming months, the prospects for the economy will become clearer. For now at least, there is reason for some very cautious optimism.’
Pound Australian Dollar Outlook: Will Upbeat Aussie Business Confidence Buoy AUD?
Looking ahead to this afternoon, the Pound (GBP) could edge lower against the Australian Dollar (AUD) following a speech from the Bank of England’s (BoE) governor.
If Governor Andrew Bailey makes any overly dovish comments and spooks investors, Sterling sentiment will slide.
Meanwhile, the ‘Aussie’ could edge higher following the release of NAB’s business confidence which is expected to improve.
If Australia’s business confidence improves more than expected in June it will send the Pound Australian Dollar (GBP/AUD) exchange rate lower.