Pound to Australian Dollar Exchange Rate Climbs despite UK Job Concerns
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate trended higher this morning. The Pound (GBP) benefitted from Reserve Bank of Australia (RBA) dovishness weighing on the Australian Dollar (AUD).
Due to a rebound in risk-sentiment last week, GBP/AUD generally trended lower. GBP/AUD opened the week at the interbank level of 1.81 and closed at the level of 1.80, over half a cent lower.
Still, GBP/AUD did touch on a high of 1.82 earlier last week. While the pair remains below the level of 1.81, GBP/AUD is climbing again today and trends just above the week’s opening levels.
The Pound’s movement is jittery amid UK Brexit and coronavirus concerns. However Reserve Bank of Australia (RBA) interest rate cut bets are keeping pressure on the ‘Aussie’.
Pound (GBP) Exchange Rates Jittery on Domestic Brexit and Coronavirus Uncertainties
The Pound (GBP) saw stronger performance yesterday, as investors reacted to the weekend’s Brexit developments.
UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen agreed at the weekend to extend Brexit talks by another month. Hopes that a breakthrough was slightly more likely helped the Pound to strengthen.
However, uncertainty persists. Sterling’s gains were limited by no-deal Brexit fears, as well as domestic coronavirus concerns.
Today, UK Chancellor Rishi Sunak has been defending the government’s fiscal support to tackle the coronavirus pandemic.
Mr Sunak says it's "a matter of social justice" the Government protects jobs in the hospitality sector.
Chancellor says accusation "doesn't stack up" because in south-west the scheme was used more than anywhere else but transmission rates are among lowest in the country.
— Theo Usherwood (@theousherwood) October 6, 2020
His comments that the government cannot continue to run borrowing forever dampened appetite for the Pound.
Australian Dollar (AUD) Exchange Rates Tumble on Reserve Bank of Australia (RBA) Decision
The primary reason for today’s GBP/AUD gains was Australian Dollar (AUD) weakness in response to the Reserve Bank of Australia’s (RBA) latest policy decision.
The Reserve Bank of Australia left monetary policy frozen, as was expected.
However, the bank also continued to indicate that it was considering further easing in order to protect Australia’s economy from the coronavirus pandemic. The bank expressed concern with Australia’s higher unemployment rate.
Markets expect the RBA will cut Australian interest rates next month. As expectations for RBA easing are likely to persist for at least another month, the ‘Aussie’ was seen as unappealing and fell today.
According to Sean Callow, FX Strategist at Westpac:
‘It has mixed commentary about things could have been worse, and they are getting better, but we know they’re still bad,’
Pound to Australian Dollar (GBP/AUD) Exchange Rate Refocuses on Coronavirus
This week’s most notable Australian news has done little to change the Australian Dollar (AUD) outlook. As a result, the Pound to Australian Dollar (GBP/AUD) exchange rate will likely return to focusing on Brexit and coronavirus developments.
The status of UK-EU Brexit negotiations remains a big focus for the Pound (GBP). Sterling will also be driven by any changes in the UK government’s coronavirus plans.
As for the Australian Dollar, it will be focused on how the global coronavirus situation is influencing market risk and trade-sentiment.
For example, if the health of US President Donald Trump worsens again, investors may become hesitant to take risks. The Australian Dollar could weaken further in this instance.
If the global coronavirus situation improves though, the Australian Dollar could strengthen again.
UK growth and trade data due at the end of the week could also influence the Pound to Australian Dollar (GBP/AUD) exchange rate.