GBP/AUD Exchange Rate Sinks as ‘Aussie’ Investors Await Australian Manufacturing PMI
The Pound to Australian Dollar (GBP/AUD) exchange rate dipped today, with the pairing currently trading around AU$1.80.
Australian Dollar (AUD) edged higher today despite fears of a second wave of the coronavirus weighing on global market confidence.
Today saw Germany’s Covid-19 infection rate shoot up to its highest level in weeks after over 1,000 abattoir employees were tested positive. As a result, investors are becoming increasingly concerned over the possibly that the Eurozone’s largest economy could be hit by another wave of cases.
Fiona Cincotta of City Index commented:
‘Even though the number of cases in Germany is low, the rise is unnerving. The markets will be watching developments closely here. Germany has been relatively successfully in keeping deaths low and reducing the spread quickly in the first wave, investors will need to this second wave nipped in the bud to boost optimism that a second wave won’t be as devastating the first.’
The Australian Dollar (AUD) is likely to struggle throughout this week if fears of a second wave continue to escalate. However, with the ‘Aussie’ being risk-sensitive, any further signs that the global economy could be facing yet another challenge would prove AUD-negative.
Meanwhile, in Australian economic news, this evening will see the release of the flash Commonwealth Bank Manufacturing PMI for June. However, if this rises above forecasts, then we could see the ‘Aussie’ benefit from renewed hopes for Australia’s economic recovery.
Pound (GBP) Steady as BoE Announces Change in Strategy as PM is Expected to Ease Social Distancing Restrictions
The Pound (GBP) struggled to gain on the Australian Dollar (AUD) today after the Bank of England (BoE) Governor Andrew Bailey appeared to signal a shift in strategy. Mr Baily suggested that the BoE could trim its balance sheet before raising interest rates.
Mr Bailey added:
‘Elevated balance sheets could limit the room for manoeuvre in future emergencies.’
‘When the time comes to withdraw monetary stimulus, in my opinion it may be better to consider adjusting the level of reserves first without waiting to raise interest rates on a sustained basis.’
However, Sterling has benefited from media reports that suggest Prime Minister Boris Johnson could announce a relaxation on social distancing rules this week.
As a result, GBP investors are becoming more optimistic about the UK’s economic recovery in the months ahead.
GBP/AUD Forecast: Could Sterling Rise as Hopes for UK’s Economic Recovery Improve?
Pound (GBP) investors will be looking ahead to tomorrow’s release of the flash UK Markit Services PMI for June. Any signs of improvement for Britain’s largest sector could buoy GBP.
Tuesday will also likely see PM Boris Johnson announce relaxations on the current 2-metre distancing rule. As a result, we could see the GBP/AUD exchange rate edge higher early in the week.
Meanwhile, the Australian Dollar (AUD) will remain sensitive to global risk sentiment. Any further fears that we could be seeing a second wave in Europe’s largest economy would prove AUD-negative.
The GBP/AUD exchange rate could edge higher this week on growing hopes for Britain’s economic recovery. However, easing social distancing restrictions would prove beneficial for the economy and improve sentiment in Sterling.