Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Falls as Easing US-Sino Tensions Boosts Risk Appetite
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped by around -0.6% this morning. This left the pairing trading at around AU$1.8413.
The ‘Aussie’ was able to rally on Monday as investors looked to positive signs that China’s economy was recovering after the coronavirus pandemic.
Added to this, easing US-Sino tensions offered riskier assets a boost. This buoyed the Australian Dollar, allowing the currency to rally 1% to a three-month high against the US Dollar (USD).
US President Donald Trump did not make any new moves to impose tariffs on China during his news conference on Friday. During this he outlined his response to Beijing’s new security law on Hong Kong.
This left markets feeling optimistic that the trade deal between the US and China may not be abandoned.
According to Ray Attrill, head of FX strategy at National Australia Bank in Sydney:
‘That removed the near-term risk of any intensification of the US-China trade war.’
‘Aussie’ investors were also encouraged by China’s PMI data which showed an unexpected improvement in China’s factory activity in May. China’s Caixin manufacturing PMI rose from 49.4 to 50.7.
Sterling (GBP) Slides as ‘Uncertainty Remains the Watchword’ for Upcoming Months
The Pound continued to slide against the Australian Dollar this morning after PMI data showed the manufacturing downturn continued in the UK.
Britain’s manufacturing PMI edged up to 40.7 in May, up from a record low of 32.6 in April as the coronavirus caused activity to stall.
The latest PMI data showed the impacts of the crisis were felt across the sector in May. Output, new orders and new export business all suffered steep declines which weighed on GBP.
Commenting on this morning’s data release, Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said:
‘Though less severe than the wrecking losses of last month, continued supply chain disruptions resulted in another strong contraction in the manufacturing sector as output fell at its fourth-fastest rate in the near 30-year survey history.
‘Even with the slight uplift in May’s sentiment as firms began to recover from the initial shock and looked to the future, optimism remained depressed. Worries over safety for returning staff and repairs to broken supply chains will be uppermost in business minds, and are obstacles to be overcome before real recovery can begin. Uncertainty remains the watchword for the months ahead.’
Pound Australian Dollar Outlook: RBA in Focus This Week
Looking ahead, the Australian Dollar (AUD) could give up some of today’s gains against the Pound (GBP) following the release of April’s new home sales data.
If HIA reveal the number of homes sold in April contracted due to the coronavirus pandemic, it will weigh on the ‘Aussie’.
Meanwhile, AUD could also remain under pressure ahead of Tuesday Reserve Bank of Australia (RBA) interest rate decision.
While the RBA is not expected to ease monetary policy, dovish comments from policymakers could allow the Pound Australian Dollar (GBP/AUD) exchange rate to make slight gains.