GBP/AUD Exchange Rate Eases Despite RBA’s Gloom Over Australia’s Economy
The Pound to Australian Dollar (GBP/AUD) exchange rate dipped today, with the pairing currently fluctuating around AU$1.84.
The Australian Dollar (AUD) rose against the Pound (GBP) today after the Reserve Bank of Australia (RBA) confirmed forecasts and held its interest rates at 0.25%.
As a result, this provided some relief to ‘Aussie’ investors as it has dispelled fears of the bank taking rates below its present record low.
However, Philip Lowe, the Governor at the RBA, was downbeat in his monetary statement, saying:
‘The Australian economy is going through a very difficult period and is experiencing the biggest economic contraction since the 1930s.’
‘In April, total hours worked declined by an unprecedented 9 per cent and more than 600,000 people lost their jobs, with many more people working zero hours.’
Meanwhile, the Australian Dollar (AUD) has benefited from a continuation of risk-on market mood this week. This owes itself to the resumption of UK-EU Brexit talks and reports that China – Australia’s biggest trading partner – is set for economic growth post-coronavirus.
Pound (GBP) Falls Despite the Beginning of Next Round of Brexit Talks
The Pound (GBP) struggled to gain against the ‘Aussie’ today as risk sentiment remains high.
Hopes are rising that the global economy could be on the road to recovery. Both China and many key European countries easing lockdowns and reopening their economies.
Today is also the beginning of the next round of UK-EU talks on Brexit. The end of June is the deadline for Britain to request an extension beyond 31st December this year.
Raoul Ruparel, Brexit adviser to Theresa May, was gloomy, commenting:
‘Certain parts of the economy will be hit by both Brexit and coronavirus.’
‘If Johnson spent government money to soften the impact in these areas, he might find there is less opposition than if he were simply spending the money to offset the impact of Brexit alone, since there is far greater unity across the political spectrum on the need for such spending to aid the recovery from Covid-19.’
GBP/AUD Outlook: Could Weak Australian Growth Data Weigh Down the Aussie?
The Australian Dollar (AUD) could rise if tonight’s release of the Australian AiG Performance of Construction Index for May improves. As a result, the ‘Aussie’ would benefit from growing hopes for the Australian economy’s recovery.
Meanwhile, ‘Aussie’ investors will be awaiting tomorrow’s publication of Australia’s growth data for the first quarter. If this falls below forecasts of -0.3%, then we could see AUD struggle.
The GBP/AUD exchange rate could fall tomorrow if the final UK Services PMI for May remains lodged in the doldrums. With the figure forecast to rise only slightly , we’re unlikely to see Sterling benefit from the UK’s gloomy economic situation.