Pound Australian Dollar (GBP/AUD) Exchange Rate Fluctuates on RBA Comments, Coronavirus Hopes

GBP/AUD Exchange Rate Slips amid Reports of a Coronavirus Treatment

The Pound to Australian Dollar (GBP/AUD) exchange rate is trending lower this morning, following reports a treatment may have been found for the coronavirus.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9292, down roughly 0.3% from today’s opening rate.

Australian Dollar (AUD) Knocked by Dovish Lowe Speech, But Rebounds on Coronavirus Optimism

The Australian Dollar (AUD) faced some headwinds overnight on Tuesday, in response to a speech from Reserve Bank of Australia (RBA) Governor Philip Lowe.

Speaking in Sydney, Lowe said the RBA is closely monitoring the economic impact of the bush fires as well as the coronavirus outbreak.

Lowe acknowledged that while these are likely to take a toll on Australia’s economy he believes any impact will be short-lived. Predicting that GDP for 2020 as a whole will be largely unaffected, echoing the RBA’s recent policy statement.

While the RBA may have held off on cutting rates this month, Lowe warned that further easing remains on the cards if employment and inflation don’t show signs of improvement.

Lowe said:

‘If the unemployment rate were to be trending in the wrong direction and there was no further progress being made towards the inflation target, the balance of arguments would change.

‘In those circumstances, the Board would see a stronger case for further monetary easing.’

However, the Australian Dollar was able to recoup the majority of its losses at the start of the European session amidst unconfirmed reports that a treatment has been found for the coronavirus outbreak.

Pound (GBP) Buoyed by Bumper Services PMI

At the same time, whilst it has given ground against the Australian Dollar (AUD) this morning, the Pound (GBP) is well supported in broader trade following the publication of the UK’s latest services PMI.

According the final figures released by IHS Markit, the UK’s services index rocketed from 50 to 53.9 in January, having been revised up from a preliminary reading of 52.9.

This indicates the UK’s all important service sector got off to a roaring start in 2020, expanding at its fastest pace since September 2018, fueled by renewed economic certainty following the general election at the end of last year.

GBP/AUD Forecast: Slump in Retail Sales to Drag on the ‘Aussie’?

Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate may trend higher overnight following the publication of Australia’s latest retail sales figures.

Economists forecast that after a bumper reading in November, Australian sales growth will have plummeted in December as the country was ravaged by bush fires.

Meanwhile, in the absence of any notable UK economic data through the latter half of the week we are likely to see GBP investors turn their focus back to Brexit.

This may see Sterling face some pressure after Boris Johnson’s bullish speech at the start of week, in which the PM threatened to walk away from trade talks with the EU if they pushed for alignment, has reignited fears of a no-deal Brexit at the end of 2020.

Matthew Andrews

Contact Matthew Andrews