GBP/AUD Exchange Rate Edges Higher as Australian Bushfires Weigh on IMF Economic Outlook
The Pound Australian Dollar (GBP/AUD) exchange rate rose by 0.4% this morning, with the pairing currently trading around AU$1.899 as market risk appetite fell on rising concerns over the impact of China’s coronavirus ahead of the Chinese New Year.
Market appetite for the risk-sensitive ‘Aussie’ was also impacted by the International Monetary Fund (IMF) cutting of its global growth forecast after directly citing the Australian bushfires as one of the main reasons for the downgrade.
The IMF said in its statement:
‘Intensifying social unrest in several countries posed new challenges, as did weather-related disasters from hurricanes in the Caribbean, to drought and bushfires in Australia, floods in eastern Africa and drought in southern Africa.
‘It could pose challenges to other areas that may not yet feel the direct effects, including by contributing to cross border migration or financial stress’.
In Australian economic news, ‘Aussie’ investors will be awaiting today’s release of this month’s Australian Westpac consumer confidence figure. As it is expected to sink by -0.8%, however, we could see the AUD/GBP exchange rate continue to remain subdued.
GBP/AUD Exchange Rate Increases as UK Employment Reports Improve
The Pound (GBP) edged higher against the Australian Dollar (AUD) after today’s release of November’s ILO unemployment rate report, which confirmed consensus and held at 3.8% against the previous month.
Today also saw the release of December’s claimant count change, which beat forecasts and rose by 14.9 thousand.
This has provided a boost for the GBP/AUD exchange rate today as it provides some positive data which could favourably sway the odds of a Bank of England rate cut later this month.
Michael Hewson, an Economist at CMC Markets, was also upbeat about the data, saying:
‘With wages growth still fairly robust and unemployment still low there doesn’t seem to be any risk in the Bank of England [BoE] exercising a little patience and waiting until the March budget before making a decision on rates’.
Meanwhile, the GBP/AUD exchange rate was also buoyed my reassurances from Sajid Javid, the Chancellor of the Exchequer, that Britain’s manufacturing sector would not suffer from the Government’s plan not to stay aligned with the European Union’s rules.
Mr Javid commented:
‘We look forward with confidence as we strike that new free trade agreement with our European friends, as we strike new free trade agreements across the world, it will be a very important time for British business. And I can see a British economy that continues to go from strength to strength’.
GBP/AUD Outlook: Could the ‘Aussie’ Sink on Sliding Risk Sentiment?
Pound traders will be looking ahead to tomorrow’s release of December’s UK public sector net borrowing report, with any signs of an improvement in the British economy last month providing a further boost for the GBP/AUD exchange rate.
Meanwhile, Australian Dollar traders will be looking further ahead to Thursday’s release of the Australian labour data reports for December. Any indications of improving employment in Australia would increase the ‘Aussie’.
US-China trade developments will also continue to drive the value of the risk-averse ‘Aussie’ this week. If tensions continue to rise between Washington and Beijing despite the newly-inked ‘phase one’ trade agreement, we could see AUD struggle against its peers.