Pound (GBP) Steady as Boris Johnson Tells Business Covid-19 Vaccines are Way out of Recession
The Pound to Australian Dollar exchange rate held steady today, with the pairing currently trading around AU$1.76.
Sterling held steady against the ‘Aussie’ today after Prime Minister Boris Johnson told UK businesses that the Covid-19 vaccine programme was the best way out of a recession.
However, some firms warned that they could not hold out until the Spring Budget.
The Confederation of British Industry (CBI) has also demanded an immediate £7.6 billion injection from the Treasury.
Tony Danker, the director-general of CBI, said:
‘The budget comes at a crucial time for the UK. The government’s support from the very start of this crisis has protected many jobs and livelihoods, and progress on the vaccine rollout brings real cause for optimism.
‘But almost a year of disrupted demand and extensive restrictions to company operations is taking its toll. Staff morale has taken a hit. And business resilience has hit a sobering new low.’
As a result, GBP investors have become concerned about the outlook for the UK’s economy for the months ahead.
Nonetheless, the UK’s Covid-19 vaccination effort has bought some relief in the from of hopes that the economy could begin reopening in spring.
Australian Dollar Steady as Risk Sentiment Improves
The Australian Dollar failed to gain against Sterling despite an improvement in risk sentiment as hopes of a substantial US Coivd-19 stimulus package has helped buoy marker sentiment.
Professor Charles Wyplosz from Geneva University commented:
‘The US economy is going to recover much faster than in Europe as Biden fires up the bazooka.’
As a result, the risk-sensitive ‘Aussie’ has begun to claw back some of its losses this week and could head higher against Sterling as the week progresses.
In Australian economic news, today saw the release of December’s HIA New Home Sales data, which rose by 32.5%.
HIA Economist Angela Lillicrap was sceptical about the rise, however, saying:
‘It is not expected that this remarkable volume of sales will continue into January. The extension of HomeBuilder to allow contracts to be signed before March 2021 with a grant of $15,000 will support the sales of new homes into 2021, but not at this elevated level.’
This evening will also see the release of January’s Australian Westpac Consumer Confidence.
Any improvement in the outlook for Australia’s economy going forward would be GBP-positive.
GBP/AUD Forecast: Could Improving Risk Sentiment Boost the Australian Dollar This Week?
Pound traders will be monitoring tomorrow’s publication of the latest UK CPI data for December.
Any signs that the UK economy could struggle in the months ahead will be GBP-negative.
UK markets will also be monitoring the UK’s Covid-19 vaccination programme. If this is proving effective, then we will see Sterling rise.
Meanwhile, the AUD/GBP exchange rate will be driven by risk sentiment this week.
As a result, we could see the risk sensitive ‘Aussie’ head higher if the US economic outlook continues to improve.
Also, if China – the world’s second-largest and Australia’s biggest trading partner – appears to be performing well economically, we would see AUD rise.