Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Slides as Australian Consumer Confidence Rebounds
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped by around -0.4% as risk appetite improved. This left the pair trading at AU$1.8242.
The Australian Dollar rallied on Wednesday after data showed a measure of consumer confidence rose for the second month in a row.
June’s consumer sentiment measure from Westpac showed it recovered all the historic loss during the peak of the coronavirus crisis. This was a promising sign for consumer spending and the overall Australian economy.
Today’s data release from the Melbourne Institute and Westpac Bank showed sentiment improved by 6.3% in June. This followed May’s record increase of 16.4%.
The increase in June took the index back to levels it recorded at the start of the year despite it remaining 7% lower compared to June 2019.
Commenting on this, Westpac’s chief economist, Bill Evans noted:
‘Remarkably, consumer confidence is now back around pre-COVID levels, having recovered all of the extreme 20% drop seen when the pandemic exploded in March-April.
‘Confidence has clearly been buoyed by Australia’s continued success in bringing the coronavirus under control, which has in turn allowed for a further easing in social restrictions over the last month.’
Pound (GBP) Falls as UK Will Not Ask EU For Brexit Extension
Sterling was left under pressure against the ‘Aussie’ as ongoing trade talks between the UK and EU continued to weigh on the British currency.
The Pound could regain some of its losses today as the EU’s chief Brexit negotiator, Michel Barnier is scheduled to speak today.
If Barnier offers further details on negotiations and suggests this could be successful, it could offer the Pound a boost.
Meanwhile, Sterling was offered some support after Prime Minister Boris Johnson’s Cabinet meeting, which likely limited losses against AUD today.
The Prime Minister confirmed that all retailers in England will be allowed to reopen from 15June. Although, the meeting also confirmed that pubs, restaurants, and hairdressers would not be able to open their doors until 4 July at the earliest.
Sterling also remained under pressure after Johnson’s Cabinet meeting confirmed the UK would not be requesting an extension from the EU.
Britain is to confirm this with the European Union on Friday, which is likely to limit further GBP gains as it increases the chance of the country crashing out of the bloc without a trade deal secured.
Pound Australian Dollar Outlook: Federal Reserve Meeting in Focus
Looking ahead, the risk-sensitive Australian Dollar (AUD) is likely to edge higher against the Pound (GBP) following the US Federal Reserve monetary policy meeting.
While analysts do not expect any major changes during today’s Fed meeting, risk appetite could increase if the bank adopts yield curve control. This will send 10-year Treasury yields lower.
If the bank is optimistic the world’s largest economy is rebounding after the coronavirus crisis despite a fully-fledged recovery being far away AUD will rise.
The uncertainty about today’s meeting is likely to leave the safe-haven US Dollar (USD) under pressure and support riskier assets such as the Australian Dollar. This would send the Pound Australian Dollar (GBP/AUD) exchange rate lower.
Commenting on this, Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo noted:
‘The Fed can afford to wait and see on yield curve control because the US economy has gotten past the crisis phase and only just entered the healing phase.
‘The markets got overly optimistic and are adjusting lower, but this is a good chance to buy the Dollar on the dip.’