GBP/AUD Exchange Rate Rises as UK Services Suffer ‘Acute’ Slowdown
The Pound to Australian Dollar (GBP/AUD) exchange rate rose by 0.3% today.
The pairing is currently trading around AU$1.783 following Prime Minister Boris Johnson’s announcement of a slew of new Covid-19 restrictions which, he warned, could remain in place for up to six months.
Mr Johnson also urged people to abide by the new Covid-19 restrictions or risk the possibility of a second lockdown.
Consequently, this has sparked concerns for the British economy, which could remain in a recession until spring next year.
In UK economic news, today saw the release of the flash UK Services PMI for September.
The figure fell below forecasts from 58.8 to 55.1, increasing anxieties over the UK’s largest sector’s prospects as new restrictions come into force.
Chris Williamson, Chief Business Economist at IHS Markit, commented on the report:
‘The UK economy lost some of its bounce in September, as the initial rebound from Covid-19 lockdowns showed signs of fading.’
‘It was not surprising to see that the slowdown was especially acute in services, where the restaurant sector in particular saw demand fall sharply as the Eat Out to Help Out scheme was withdrawn. Demand for other consumer-facing services also stalled as companies struggled amid new measures introduced to fight rising infection rates and consumers often remained reluctant to spend.’
Australian Dollar (AUD) Sinks as Risk-Sentiment Slumps on Rising Covid-19 Infection Rate
The Australian Dollar (AUD) has suffered from worsening risk-sentiment today as markets remain cautious about the rising global Covid-19 infection rate
Today also saw the release of the Australian Retail Sales report for August, which fell from 3.2% to -4.2%.
As a result, ‘Aussie’ investors have become concerned for the nation’s economy which is expected to suffer going forward.
Analysts at Reuters commented:
‘Australian retail sales fell -4.2% in August from the month earlier, preliminary data showed on Wednesday, with the virus-stricken state of Victoria bearing the brunt of the downturn.
‘Victoria saw large falls across all industries, except food retailing as a strict lockdown saw many businesses shut their doors to customers.’
Meanwhile, the risk-averse ‘Aussie’ has suffered from fresh concerns over US-China trade tensions.
US President Donald Trump has continued to blame China for the spread of the coronavirus. This has left many investors concerned that relations between the world’s two largest economies could sour in the months ahead.
Mr Trump said:
‘We must hold accountable the nation which unleashed this plague on to the world – China.’
GBP/AUD Outlook: Could the ‘Aussie’ Sink Deeper on US-China Trade Tensions?
Pound (GBP) traders will be looking ahead to tomorrow’s speech from Bank of England (BoE) Governor Andrew Bailey. Any further signs that the Bank could hold interest rates would prove GBP-positive as fears of negative rates cool off.
If Mr Bailey is notably dovish about the British economy, we could see the GBP/AUD exchange rate begin to sink.
The Australian Dollar (AUD) will remain sensitive to global risk sentiment. If the Covid-19 infection rate increases throughout Europe and the US, then the risk-averse ‘Aussie’ will suffer.
The GBP/AUD exchange rate could edge higher this week if US-China trade tensions intensify. As a result, the Australian Dollar will suffer as market sentiment deteriorates on global economic uncertainties.