GBP/AUD Exchange Rate Rises as Risk Sentiment Sours, Limiting the Risk-Sensitive Australian Dollar
The Pound Australian Dollar exchange rate rose today as demand for the risk-sensitive ‘Aussie’ has fallen because of souring risk sentiment and fears of a rising number of Covid-19 infections in large economies like the United States and China. The pairing is currently fluctuating around $1.86.
In Australian economic news, the latest flash retail sales data fell below forecasts, shrinking from May’s 0.4% to -1.8%, clouding the outlook for the nation’s growth in the third quarter.
ANZ economists were also downbeat, saying in a note:
‘We expect retail sales to fall again in July as the Sydney lockdown intensifies, another Melbourne lockdown starts and South Australia also falls into lockdown.’
‘As the risks of a long Sydney lockdown increase, so do the risks of a muted recovery.’
Australia’s extended lockdown period in the state of Victoria and in Syndney have weighed on demand for the ‘Aussie’.
In addition, concerns about rising cases of the Delta variant of the coronavirus in China – Australia’s largest trading partner – has also sparked concerns of a future of economic difficulties facing the Australia in the months ahead.
Pound (GBP) Exchange Rate Edges Higher as UK Public Borrowing Falls in June
The Pound (GBP) rose today as confidence in the UK economy has risen following a fall in the nation’s Government borrowing figure compared to June last year.
Ruth Gregory, an analyst at Capital Economics, commented:
‘Total tax receipts of £62.2bn in June were well above May’s (upwardly revised) £59.5bn and last June’s £52.7bn. And the trend in tax receipts should continue to improve over the rest of the year as stronger GDP growth than anticipated by the OBR boosts the public coffers.
‘But while debt service costs will probably stay higher than the OBR estimated over next few years, the public finances should continue to reap the benefits of a faster and fuller recovery in GDP than the OBR expects, meaning that the deficit should still fall faster.’
Now lockdown restrictions have been lifted, Pound investors have also become more optimistic about the outlook for the UK economy in the months ahead.
Although Covid-19 infection rates are soaring and hospitalisations increasing, GBP investors are more hopeful that the vaccination programme could hold off another lockdown.
Nevertheless, the GBP/AUD exchange rate remains precarious, with Downing Street and the world closely monitoring the nation’s Covid-19 situation.
GBP/AUD Exchange Rate Forecast: Australia Consumer Confidence Data in Focus
Tomorrow will see the release of Australia’s National Australia Bank’s (NAB) latest business confidence report for Q2.
If we see an improvement in Australia’s consumer morale, then we could see the AUD/GBP exchange rate head higher.
AUD traders will also monitor the speech from the Reserve Bank of Australia’s (RBA) Governor, Philip Lowe, tomorrow. Could a dovish statement further weigh on the ‘Aussie’?
Pound investors will monitor the UK’s Covid-19 situation. Any signs of a possible new lockdown would drag down the GBP/AUD exchange rate.