Lowered Australian Credit Rating Outlook Unable to Boost Pound Australian Dollar (GBP/AUD) Exchange Rate
Rating agency S&P’s decision to lower the outlook on Australia’s AAA rating from stable to negative failed to offer the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate any boost.
Even so, the mood towards the Australian Dollar (AUD) soured in the wake of the news, with S&P warning that a ratings downgrade could be in store further down the line.
This move underlined the negative impact that the Covid-19 outbreak has already had on the Australian economy, limiting the strength of AUD exchange rates.
However, as the general sense of market risk appetite remained elevated ahead of the release of the Federal Open Market Committee’s (FOMC) latest set of meeting minutes the Australian Dollar still found some degree of support.
Reports on Johnson’s Health Fail to Shore up Pound Demand
While reports suggest that Boris Johnson’s condition remains stable this failed to offer any significant reassurance to investors.
With the prime minister still in intensive care the prospect of political disruption continued to hang over the outlook of GBP exchange rates today.
As markets still expect to see the UK economy weaken significantly in the near term the Pound struggled to find any degree of traction against its rivals.
Until the Covid-19 situation shows greater signs of stabilising within the UK a sense of risk aversion looks set to limit the GBP/AUD exchange rate’s ability to return to an uptrend.
GBP/AUD Exchange Rate Looks Vulnerable Ahead of UK GDP Data
A fresh downtrend could be in store for the Pound tomorrow, meanwhile, with the release of February’s UK gross domestic product data.
Although forecasts point towards a modest 0.1% uptick in the monthly growth rate this may not be enough to encourage any renewed sense of demand for the Pound.
With March’s monthly growth rate looking set to deliver a major contraction as a result of the Covid-19 lockdown the odds of a pronounced first quarter GDP decline appear high.
Short of a major upside surprise the growth data is unlikely to give the GBP/AUD exchange rate any real momentum, especially if the accompanying production figures show fresh signs of a slowdown.
As long as investors see reason to doubt the underlying health of the UK economy a sense of anxiety could keep the Pound on the back foot.
Global Trade Slowdown Fears Set to Weigh on Australian Dollar
Developments in the global trade outlook may see the Australian Dollar come under pressure in the days ahead, however.
After the World Trade Organisation’s warning that trade could slow dramatically in 2020, potentially matching the deterioration seen during the Great Depression, the upside potential of risk-sensitive assets could ease.
Support for the Australian Dollar could also weaken ahead of the weekend if March’s Chinese consumer price index data proves underwhelming.
Until markets see evidence that the world’s second largest economy is rebounding from the fallout of the pandemic a sense of risk aversion could help to limit the potential for further GBP/AUD exchange rate losses.