GBP/AUD Exchange Rate Falls, But Could Risk Sentiment Improve?
The Pound to Australian Dollar (GBP/AUD) exchange rate rose by 0.6% today, with the pairing currently trading around AU$1.82.
The Australian Dollar (AUD) has suffered from a sell-off of risky assets today, with ‘Aussie’ investors awaiting US Federal Reserve Chairman Jerome Powell’s testimony later today.
However, with the Fed likely to reveal a downbeat forecast for the world’s largest economy, investors are flocking back to safe-haven currencies like the US Dollar and Japanese Yen.
Nevertheless, we’re seeing risk sentiment fast improve on hopes of further US stimulus measures. As a result, we could see AUD begin to edge higher.
Deutsche Bank analysts commented:
‘News that the White House is considering a $1tn infrastructure proposal has seemingly also given risk assets a boost. The prospect of further stimulus was already known however the size and timing was more up in the air.’
Following yesterday’s disappointing Chinese economic data, AUD investors are also concerned that China – Australia’s biggest trading partner – is in for a slower-than-expected recovery. Consequently, this has also sparked anxiety over Australia’s struggling economy.
Today also saw the release of Australia’s house price index for the first quarter, which fell below forecasts from 3.9% to 1.6%.
ABS chief economist Bruce Hockman said that the results were pretty much in line with expectations, saying:
‘The majority of restrictions relating to COVID-19 came into effect in late March and therefore did not have a noticeable impact on property prices in the March quarter 2020.’
Pound (GBP) Rises as UK Unemployment Remains Unchanged in April
The Pound (GBP) rose against the weaker ‘Aussie’ today after the UK’s ILO unemployment report for April held steady at 3.9%. As a result, Sterling traders are feeling more optimistic that joblessness could improve now that non-essential shops have reopened.
Neil Carberry, CEO of the Recruitment and Employment Confederation, commented on the data:
‘The headline figures may not show it, but a lot has changed since April – with the claimant count rising to 2.8m, the unemployment rate is likely to be much higher than 3.9% now.’
‘But with the lockdown being eased and the economy opening up, hiring should grow. The scale of the growth in unemployment through the rest of the year will depend on consumer confidence and how employers react to the winding down of the furlough scheme.’
Meanwhile, today also saw the release of April’s average earnings figures fall below forecasts from 2.7% to 1.7%. As the UK’s economy continues to reopen, however, we could see Sterling improve as economic hopes continue to grow.
Furthermore, with increasing pressure on Downing Street to scrap the 2-metre social distancing guidelines, the outlook for the British economy looks somewhat brighter. If lockdown measures and guidelines are eased, then this would boost footfall and improve other areas of the economy.
GBP/AUD Outlook: Could Dampened Risk Sentiment Push ‘Aussie’ Down Further?
Australian Dollar (AUD) investors will be looking ahead to tomorrow’s release of the Westpac Leading Index for May. However, if this continues to fall, we could see AUD suffer.
Tomorrow will also see the release the UK’s CPI figure for May. Any signs of this falling would prove GBP-negative.
Meanwhile, UK retail sales figures for May will also be in focus. If last month’s figures improve, then we could see a glimmer of hope for the UK’s retail sector.
The GBP/AUD exchange rate will continue to be driven by risk-sentiment this week. As a result, we could see Sterling benefit against AUD as investors flock from riskier assets.