Pound Australian Dollar (GBP/AUD) Exchange Rate Muted as Optimism Increases
The Pound Australian Dollar (GBP/AUD) exchange rate remained flat on Wednesday, leaving the pairing trading at around AU$1.9265.
The ‘Aussie’ received a boost thanks to an increase in optimism fuelled by reports the spread of Covid-19 had slowed.
Commenting on this, Mizuho Bank’s head of economics, Vishnu Varathan stated:
‘Two things are giving cause for optimism. The rate of infections is slowing and the number of recoveries is going up faster than deaths. Markets have pulled back from the verge of the cliff […] they’ve avoided a free fall.’
However, the levels of new cases have stabilised and not recovered, suggesting investors are likely to remain cautious.
With the death toll in China surpassing 1,100, it now means the rate of death among the reported cases is around 2%.
Australian Dollar (AUD) Rises as Aussie Confidence Improves
Despite the increase in risk appetite and upbeat consumer confidence, the ‘Aussie’ was unable to rally against GBP.
Westpac’s consumer confidence rose by a better-than-expected 2.3% in February to 95.5.
This indicated that consumer mood improved and concerns about the impact of the bushfires improved.
However, Westpac revealed that sentiment remained weak overall and was below the long-run average of 101.4.
The figure also remained below 100 for the sixth month in a row.
Yesterday: Sterling (GBP) Boosted by Better-Than-Expected GDP Growth
The Pound edged lower today despite receiving a boost during Tuesday’s session following the release of UK GDP data.
Data revealed growth in the final quarter of 2019 stagnated, although this was better than expected.
This came as reassurance to investors, as it lowers the chance of the Bank of England (BoE) slashing interest rates.
In last month’s meeting, the bank signalled that it was looking to see if growth picked up after December’s general election before deciding whether or not to ease monetary policy.
Commenting on Tuesday’s data, Jeremy Thomson-Cook, chief economist at payments provider Equals Group noted:
‘This is a mucky figure with the true sense of the UK economy’s performance occluded by the election of December 12.
‘More forward-looking data […] are more optimistic, and while outright optimism would be misplaced, upgrades to previous quarters are well received.’
Pound Australian Dollar Outlook: Will a Dovish RBA Weigh on AUD?
Looking ahead to Thursday, the Australian Dollar (AUD) could suffer some losses against the Pound (GBP) following a speech from the Reserve Bank of Australia’s (RBA) Governor Philip Lowe.
If Lowe is overly dovish about the outlook for the Australian economy, and focuses on the ongoing issues with unemployment, AUD will edge lower.
However, increased risk appetite could prevent the ‘Aussie’ from sliding against the Pound.
If figures suggest the spread of the virus continues to ease, the Pound Australian Dollar (GBP/AUD) exchange rate will remain flat.