Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Rallies as Aussie Confidence Plunges
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate rose by around 0.9% this morning. This left the pairing trading by around AU$1.9786.
The Australian Dollar remained under pressure this morning after data revealed consumer sentiment in the country plummeted.
Westpac’s Aussie consumer confidence suffered its largest fall on record, taking the index to levels only seen during recessions.
Household confidence slumped by 17.7% in April as lockdowns and restrictions due to the coronavirus pandemic shut down large tracts of the economy.
According to Westpac’s chief economist, Bill Evans:
‘[The details of the survey] are all very disturbing and reflect the large shocks to jobs and spending.
‘While the drop in confidence this month is severe, it could well have been worse. Despite the bleak and threatening backdrop, Australia’s pandemic experience to date has been much less debilitating than that of the hardest hit areas abroad.’
Sterling (GBP) Rises Traders Flock Back to Safety
The Australian Dollar also suffered losses as increasingly cautious sentiment sent traders flocking back to the safety of the US Dollar (USD).
Concerns the economic damage to the global economy would be lengthy and drawn out sent increased the appeal of the safe-haven.
This also dampened the appeal of Sterling, although weakness in the ‘Aussie’ thanks to a record drop in confidence allowed GBP to make gains.
Ulrich Leuchtmann, head of FX strategy at Commerzbank noted:
‘That means the worst might yet be to come, facing the market with an ice bucket challenge. In that case risk aversion would rise, allowing the Dollar to appreciate again.’
IMF: Global Economy to Experience Worst Downturn Since the Great Depression
Meanwhile, on Tuesday the International Monetary Fund (IMF) warned the global economy is likely to shrink by 3% this year.
The coronavirus-driven collapse of global activity is expected to mark the largest downturn since the 1930s Great Depression.
This dampened risk sentiment, and weighed on the risk-sensitive ‘Aussie’, sending it lower against the Pound.
In its report, the IMF wrote:
‘It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago.
‘The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.’
Pound Australian Dollar Outlook: Aussie Employment Statistics in Focus
Looking ahead, the Australian Dollar (AUD) could suffer further losses against the Pound (GBP) following the release of employment statistics.
If the Aussie unemployment rate skyrockets, it will send the Australian Dollar lower against a handful of currencies.
Meanwhile, the risk-sensitive ‘Aussie’ is likely to remain under pressure if risk appetite continues to fall.
If traders continue to flock back to the safety of the US Dollar (USD), riskier assets like AUD will suffer losses, leaving the Pound Australian Dollar (GBP/AUD) exchange rate to edge higher.