UPDATE: The Pound Australian Dollar exchange rate fell by -0.2 later this afternoon after Prime Minister Boris Johnson warned that some ‘extra precautions’ could be needed in England after 19 July. The pairing is currently fluctuating around AU$1.70.
Boris Johnson added that the country is now in the ‘final furlong’ on lifting lockdown restrictions this month, adding:
‘We have to look very carefully at the data and at the moment of what we’re certainly seeing is a big increasing in cases, 26,000 as you will have seen, but that is not translating into a big increase in serious illness, and death.’
Rising cases of the Delta coronavirus in Australia, however, have begun to limit demand for the ‘Aussie’.
But could improving risk sentiment sustain demand for the risk-sensitive Australian currency throughout the rest of this week’s session?
GBP/AUD Exchange Rate Rangebound on Growing Delta Variant Concerns
The Pound Australian Dollar exchange rate held steady this morning as risk-off market mood limited the appeal of the risk-sensitive ‘Aussie’. The spread of the new coronavirus Delta variant has caused concern for global market recovery. The pairing is currently trading around AU$1.84.
This week also saw China – Australia’s largest trading partner – show signs of economic weakness.
Outbursts of the coronavirus across China have dampened consumer sentiment and slowed factory production in June.
Jonathan Cheng, an analyst at The Wall Street Journal, commented:
‘The hints of weakness on both fronts come as economists lowered expectations for growth in the world’s second-largest economy. In recent weeks, Morgan Stanley and Barclays, among others, have downgraded their forecasts for China’s full-year gross domestic product to below 9%, citing the impact of higher raw material prices on production and weaker-than-expected consumption.’
In addition, new data has revealed that fewer than 40% of Australia’s most vulnerable citizens have been fully vaccinated.
Australia’s finance minister, Simon Birmingham, also said that the country was at the ‘back of the queue’ for Pfizer vaccines.
Birmingham explained that ‘because European countries and drug companies have favoured those nations who’ve had high rates of Covid for the delivery of vaccines like Pfizer’.
As a result, Australian Dollar traders have become more cautious about the outlook for the domestic economy.
A delay in vaccinations could cause a lag in those most vulnerable receiving their second jab and impede the nation’s economic recovery.
Pound (GBP) Exchange Rate Steady Ahead of UK Manufacturing PMI Data
The Pound (GBP) is rangebound against the ‘Aussie’ ahead of today’s latest UK June manufacturing PMI. This is expected to confirm forecasts at 64.2 – slightly lower than May’s high of 65.6. Demand has remained strong, so we could see an uptick in the data.
Fhaheen Khan, the senior economist at Make UK, said last month:
‘Manufacturing growth is now firmly accelerating as restrictions have been eased and economies around the globe have started to open up.
‘Looking forward there seems no reason to believe that this will not continue, assuming the shackles come off firmly in the second half of the year.’
As a result, we could see the Pound Australian Dollar exchange rate begin to edge higher as confidence in the British economy grows.
Today will also see a speech from Bank of England (BoE) Governor Andrew Bailey. Any upbeat comments about the outlook for the UK economy would be GBP-positive.
GBP/AUD Exchange Rate Forecast: Australian Homes Data and Risk Sentiment in Focus
Australian Dollar (AUD) investors will eye tomorrow’s release of the latest Australian home loans data for May.
Any improvement in the outlook for the Australian housing sector would be boost the ‘Aussie’.
Risk sentiment will also drive the AUD/GBP exchange rate. Could rising concerns over the spread of the Delta variant limit demand for risky assets such as the Australian Dollar?
Pound traders will continue to monitor to the Government’s comments about the easing of lockdown restrictions on July 19.
Any indications that the data and new health secretary Sajid Javid remain on track for the irreversible lifting of lockdown restrictions next month would be GBP-positive.