Pound Australian Dollar Exchange Rate Dips as UK Covid-19 Infection Rates Soar

UPDATE: Pound Australian Dollar Exchange Rate Dips as UK Covid-19 Infection Rates Increase

The Pound Australian Dollar (GBP/AUD) exchange rate dipped latter this afternoon after it was revealed that daily cases of Covid-19 had soared to 16,354. This has cast doubt on whether the Government’s target of lifting restrictions on 19 July will go ahead.

Nevertheless, the Pound has been buoyed by reassuring comments from Prime Minister Boris Johnson and Health Secretary Matt Hancock this week, who both said they were optimistic about July’s lifting of measures because of low levels of hospitalisations and deaths from the virus.

GBP/AUD Exchange Rate Despite an Improvement in Australian Business Conditions

The Pound Australian Dollar exchange rate held steady this morning following the publication of the latest Australian Commonwealth Bank composite PMI data for June, which dipped from 58 to 56.1. The pairing is fluctuating around AU$1.84.

The Australian Dollar (AUD) however struggled following the publication of the latest PMI data, which revealed that Australia’s private sector had slowed to a three-month low this month.

Jing Pang, economics associate director at IHS Markit, commented on the slowing of Australia’s private sector:

‘Australia’s private sector growth momentum further eased in June but remained at a strong level to indicate continued improvement in economic conditions during the recovery from the COVID-19 pandemic.’

‘Renewed movement restrictions in the Victorian state and supply constraints stood out as two key reasons weighing on the growth momentum for Australia in the June flash PMI data, which is worth scrutinising. Meanwhile private sector firms were also slightly less optimistic with regards to output in the next 12 months amid the uncertain virus and supply situation.’

Australia’s growth momentum eased in June but has on the whole remained strong, despite the nation’s grappling with the coronavirus pandemic.

The risk-sensitive ‘Aussie’ has also benefited from a fall in US stocks today as confidence grows in the global Covid-19 situation.

Falling case numbers in Europe and the US are buoying demand for risky assets such as the Australian Dollar.

Commenting on the hawkish tone from the US Federal Reserve, Robert Kaplan, President of the Dallas Federal Reserve, said:

‘What you are seeing…is monetary policymakers simply reacting to the dramatically improved economic outlook.’

Pound (GBP) Exchange Rate Steady Despite Strong UK PMI Data

The Pound (GBP) failed to rise against the ‘Aussie’ today following the publication of the latest flash UK manufacturing and services PMI data for June.

The UK manufacturing PMI beat forecasts at 64.2, while the services PMI underperformed, falling from 62.9 to 61.7.

Chris Williamson, the Chief Business Economist at IHS Markit, was upbeat about the data, however, saying:

‘Businesses are reporting an ongoing surge in demand in June as the economy reopens, led by the hospitality sector, meaning the second quarter looks to have seen economic growth rebound very sharply from the first quarter’s decline.’

Duncan Brock, the group director at CIPS, warned about rising inflation, commenting:

‘In service businesses, consumers were hit with considerably higher prices for food and hospitality, increasing the threat of soaring inflation in the UK economy this summer.’

Pound investors have become more optimistic about the outlook for the UK economy after Prime Minister Boris Johnson and Health Secretary Matt Hancock said it was looking positive that the nation could lift lockdown restrictions next month.

Pound Australian Dollar Exchange Rate Forecast: Could a Bullish BoE Boost Sterling on Thursday?

Pound (GBP) traders are awaiting tomorrow’s interest rate decision from the Bank of England (BoE).

While the BoE is expected to hold rates at 0.1%, any bullish commentary about the outlook for the British economy would boost the Pound Australian Dollar exchange rate.

Looking ahead to Friday, GBP investors will be eyeing the latest UK consumer confidence data for June. If this improves, then the GBP/AUD exchange rate would head higher.

Risk sentiment will continue to drive the ‘Aussie’ this week. So any signs of falling Covid-19 cases in key economies such as Europe and the US would be AUD-positive.

David Moore

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