GBP/AUD Exchange Rate Falls as RBA Says Government Stimulus Appears to be Working
The Pound to Australian Dollar (GBP/AUD) exchange rate fell by -0.4% today, with the pairing currently trading around AU$1.82.
The Australian Dollar (AUD) rose today after the Reserve Bank of Australia (RBA) held interest rates at 0.25%. However, the RBA noted that it would retain its wait-and-see approach as ‘the mid-March package of support for the Australian economy’ had continued to work as expected.
The RBA also added:
‘[T]he Australian Government’s recent announcement that various income support measures will be extended.’
However, ‘Aussie’ investors are also becoming more optimistic that Australia could avoid a ‘second wave’ of Covid-18 cases in Victoria, Australia’s second most populous state.
The Australian Dollar (AUD) also benefited from a better-than-expected Australian retail sales figure for June, which rose from 2.4% to 2.7%.
Analysts at Reuters were downbeat, however, saying:
‘Australia’s retailers are facing a consumption drought as the country’s second biggest state locks down to fight the coronavirus and as data showed sales volumes suffered their biggest plunge in two decades in the second quarter.’
Pound (GBP) Sinks as UK Economic Outlook Dims on Fears of London Lockdown
The Pound (GBP) struggled at the beginning of this week’s session on rising fears of a second London lockdown to halt the spread of Covid-19. This would have a significant effect on the British economy and has since held back Sterling.
Meanwhile, GBP failed to gain on the Euro (EUR) after various researchers have warned that Downing Street would need to significantly improve its test-and-trace systems or risk a second wave of the coronavirus after schools reopen.
Shadow Education Secretary, Kate Green, said:
‘The government can’t walk away from its responsibilities. Ministers must rapidly improve the test-and-trace system before pupils go back to class in September.’
Meanwhile, Sterling investors are becoming increasingly concerned for the British economy after yesterday’s release of the UK Manufacturing PMI for July fell below forecasts.
Today also saw worries over the UK’s unemployment rate rise after PizzaExpress announced plans to close 15% of its 449 UK restaurants. As a result, this has sparked fears that other companies could follow in the wake, with the coronavirus dragging down the British economy.
GBP/AUD Forecast: Could London Lockdown Fears Drag Down the Pound?
Pound (GBP) investors will be looking ahead to tomorrow’s release of the final Markit Services PMI for July. If this beats forecasts and edges higher, then we could see Sterling claw back some of its losses.
Australian Dollar (AUD) traders will be awaiting tomorrow’s release of the latest Australian Home Loans figures for June. However, if the figure remains subdued, we could see the ‘Aussie’ struggle.
The GBP/AUD exchange rate will remain sensitive to the UK’s coronavirus developments this week. Any further signs that London could face another lockdown would prove Pound-negative.