Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Slides despite Rising Covid-19 Cases
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped by around -0.3%. This left the pairing trading at around AU$1.7956.
The Australian Dollar struggled to make significant gains against the Pound on Friday as traders focused on the rising number of coronavirus cases.
Record number of fatalities in Florida and Texas along with more than two million cases in Brazil sent traders flocking for safer assets.
Some investors have said they are starting to see signs the jump in coronavirus infections is threatening the US economy. Although, this did not stop AUD from making slight gains against a weaker Pound.
Added to this, the deteriorating relations between the US and China weighed on sentiment. This gave traders more reason to avoid riskier assets such as the ‘Aussie’.
Renewed tensions between the United States and China weighed on sentiment. Reports suggest US President Donald Trump’s administration is considering banning travel to the US by all members of China’s Communist Party.
The currency also struggled after yesterday’s data showed Australia’s unemployment rate soared to a 22-year high.
June’s jobless rate jumped to 7.4% despite employment rising by a record 210,800 as a huge number of Australians looked for work as the economy began to reopen.
Although, AUD remained under pressure as many economists don’t expect the number of people in work to return to pre-Covid-19 levels until early 2020.
According to Diana Mousina, AMP economist:
‘We expect the unemployment rate to reach around 8.5-9% by the end of the year. This means that there is a need for government fiscal stimulus to keep going for now.’
Pound (GBP) Set for Biggest Fall in a Month
Sterling struggled at the end of this week’s session, easing against both the ‘Aussie’ and US Dollar (USD). Against USD, the Pound was set for its largest weekly fall in a month due to a range of factors.
Growing uncertainty over the country’s economy, Brexit negotiations and a high coronavirus death toll all weighed on Pound sentiment.
GBP has been the worst performing G10 currency this week as downbeat data also sparked fears the Bank of England (BoE) would send rates into negative territory.
According to CMC Markets UK’s chief market analyst, Michael Hewson:
‘The Pound has had a slightly more negative week over concern that weaker data will prompt further action on the rates front from the Bank of England at its September meeting.’
Sterling also edged lower as traders questioned whether the fiscal stimulus would be enough to prop up the economy. While unemployment held steady at 3.9% in May, economic growth did not rise as high as expected.
Commenting on this, Adam Cole, chief currency strategist at RBC Capital Markets said:
‘Activity data have generally disappointed this week, but as the data flow dries up and trade talks reopen next week, expect Brexit to come back to the fore as a driver of GBP.’
Pound Australian Dollar Outlook: UK Consumer Confidence in Focus
Looking ahead, the Pound (GBP) could claw back some losses against the Australian Dollar (AUD) following the release of UK consumer confidence data.
If flash confidence rises higher than expected in July it will offer Sterling some support.
Meanwhile, the ‘Aussie’ could slide next week if risk appetite declines further.
Risk appetite will decline further next week if markets continue to focus on deteriorating US-China relations and the surge in coronavirus cases. This will cause traders to rush to safer assets and leave the Pound Australian Dollar (GBP/AUD) exchange rate flat.