US and China News Knocks Risk-Sentiment and Boosts GBP/AUD Slightly

Last week’s higher risk-sentiment appears to have faded, as the Pound to Australian Dollar (GBP/AUD) exchange rate is edging higher again today. It comes amid concerns over US fiscal stimulus blocks, as well as news that the Peoples Bank of China (PBoC) had taken measures perceived as aimed at weakening the Chinese Yuan (CNY), as these factors made investors hesitant to buy riskier assets like AUD.

Last Week: Mixed Brexit and Risk-Sentiment Causes Jittery Market Movement

The Pound and Australian Dollar both saw mixed movement last week. The Pound was supported by higher hopes that a Brexit deal could still be reached, but gains were limited by persisting fears that negotiations could collapse as soon as next week.

This uncertainty weighed on the Pound, but the Australian Dollar struggled to capitalise on a jittery Pound.

Risk-sentiment and the Australian Dollar benefitted slightly from bets that Democratic Challenger Joe Biden would win next month’s US Presidential Election and push through more fiscal policy.

However, ultimately persisting US political uncertainty limited the Australian Dollar’s appeal.

Three Things to Watch For This Week

  1. UK Job Market Report

This week’s only noteworthy UK data will be the nation’s latest job market report. The data is due tomorrow. If Britain’s job market has been hit even harder than expected by the coronavirus pandemic, the Pound is likely to weaken.

2. Australian Job Market Report

Australia’s job market is typically seen as a major indication of the health of Australia’s economy. The data will be closely watched by the Reserve Bank of Australia (RBA) and strong data could boost AUD demand.

3. Brexit Developments

This week was originally expected to be a major deadline in Brexit negotiations. However, while talks have been extended, there are still fears that the UK government could pull out of negotiations if there has not been enough progress.

GBP/AUD Outlook

Brexit uncertainty will remain another key factor in Pound movement once again this week. However domestic coronavirus developments and signs over how the pandemic is hurting jobs will also be closely watched by GBP/AUD investors.

Josh Jeffery

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