GBP/AUD Exchange Rate Falls as UK Industrial Production Plummets in April
The Pound to Australian Dollar (GBP/AUD) exchange rate fell by 0.4% this morning, with the pairing currently trading around AU$1.83.
The Pound (GBP) struggled today following this morning’s release of April’s UK GDP figure, which fell from -5.8% to -20.4%. As a result, Sterling traders are increasingly concerned that Britain’s economy could face an unprecedented recession in the second quarter.
Jonathan Athow of the Office for National Statistics (ONS), commented on the report:
‘April’s fall in GDP is the biggest the UK has ever seen, more than three times larger than last month and almost ten times larger than the steepest pre-COVID-19 fall. In April the economy was around 25% smaller than in February.’
‘Virtually all areas of the economy were hit, with pubs, education, health and car sales all giving the biggest contributions to this historic fall.’
Today also saw the release of the UK’s industrial production figure for April plummet from -4.2% to -20.3%.
Meanwhile, UK’s trade with other countries also collapsed in April, with export volumes falling by 17.7% month on month, while imports fell by a whopping 26.5%. Furthermore, exports and imports fell to their lowest levels since records began in 1998.
Australian Dollar (AUD) Edges Higher as Risk Sentiment Improves
The Australian Dollar (AUD) recovered today after Thursday’s retreat in Asian stock markets after the US Federal Reserve’s dovish outlook weighed on risk sentiment.
Daniel Been, the head of currency research at ANZ, commented:
‘The Fed noted that financial conditions have improved, limiting the need for further action in the near term. But it is clearly willing to do what is necessary, with unlimited QE giving it options. Given the recent run in the AUD, consolidation is expected in the near term, with eyes on risk markets for direction.’
However, the ‘Aussie’ has also benefited from declining numbers of new coronavirus infection numbers and growing efforts to reopen economies worldwide. As a result, the Australian Dollar has benefited from rising hopes that this will pay off for Australia’s export-reliant economy.
Meanwhile, Australia-China trade tensions are flaring up. Nevertheless, some analysts say that China can’t stop buying iron ore from Australia, leaving investors confident that tensions may ease off in the coming months.
Gavin Thompson, Asia Pacific vice chairman for energy at Wood Mackenzie, commented:
‘Any disruption to its imports of Australian energy and iron ore would have an immediate impact on both price and China’s own supply needs.’
GBP/AUD Outlook: Could a Dovish RBA Weigh on the ‘Aussie’ Next Week?
Australian Dollar (AUD) investors will be looking ahead to Tuesday’s release of the Reserve Bank of Australia’s (RBA) minutes. However, any downbeat comments about Australia’s economy would prove AUD-negative.
Meanwhile, Pound (GBP) traders will be awaiting the release of the UK ILO unemployment rate figure for April. However, with joblessness expected to rise, we could see the GBP fall further.
The GBP/AUD exchange rate will remain sensitive to the UK’s coronavirus situation. As a result, we could see the Pound edge higher if Downing Street continues to ease its nationwide lockdown measures.