UPDATE: The Pound Australian Dollar exchange rate rose today following the latest UK Covid-19 report, which revealed that cases had dropped for their seventh day in a row.
However, Downing Street has remained cautious, warning that recent data has not included post-19 July lifting of lockdown measures.
Neil Ferguson, who is on the Government’s Scientific Advisory Group for Emergencies (SAGE), was more optimistic, however, saying:
‘I’m positive that by late September or October time we will be looking back at most of the pandemic.’
GBP/AUD Exchange Rate Edges Higher, Number 10 Remains Cautious About UK Covid-19 Developments
The Pound Australian Dollar exchange rate rose today despite Number 10’s resistance about the fall in Covid-19 cases, which it declared ‘encouraging’ but that the data has not yet reflected the effects of the unlocking of coronavirus restrictions on 19 July. The pairing is currently fluctuating around AU$1.87.
Sterling failed to benefit significantly from daily infections falling to their lowest level in three weeks at 24,950.
A spokesperson for Prime Minister Boris Johnson said that the UK was ‘not out of the woods yet’ adding that the full impact of the lifting of lockdown restrictions had not yet been reflected in data.
Sir Jeremy Farrar, head of the Wellcome foundation and a member of Sage, said ‘you can only celebrate a reduction in the caseload’.
Farrar added:
‘I think the big change, in terms of lifting restrictions, was actually, the prior change [step 3] rather than 19 July.’
As a result, Pound investors have become cautiously optimistic, with hopes that later data will show a continued decrease in daily infection rates and hospitalisations.
In absence of any notable UK economic data today, Pound investors will continue to monitor UK Covid-19 developments.
Any further signs of falling daily Covid-19 infections could see the GBP/AUD exchange rate head higher.
Australian Dollar (AUD) Exchange Rate Falls on Risk-On Market Mood
The Australian Dollar (AUD) continued to struggle today because of souring global risk sentiment. With rising cases of Covid-19 variants throughout China and Europe, many investors have steered clear of risk-correlated currencies like the ‘Aussie’.
Added to this, US-China relations have remained tense at the end of Tianjin talks. Beijing has blamed Washington for a ‘stalemate’ in the two-way ties between the world’s two largest economies.
A senior US administration official reported:
‘I think it’d be wrong to characterize the United States as somehow seeking or soliciting China’s cooperation
‘It is going to be up to the Chinese side to determine how ready they are as well to… take the next step.’
As a result, AUD investors have become concerned that tensions between the two nations could have a negative effect on the Australian economy in the coming months.
China is Australia’s largest trading partner, so any signs of tensions between the US and China translates to a weaker Australian Dollar.
Coming up today, the Reserve Bank of Australia’s (RBA) assistant governor, Guy Debelle, is due to deliver a speech.
Could a dovish statement from the RBA see the AUD/GBP exchange rate sink further?
GBP/AUD Exchange Rate Forecast: Australian Inflation Data in Focus
Australian Dollar (AUD) investors will be looking ahead to Wednesday’s publication of the latest Australian consumer price index for the second quarter.
Could an improvement in the outlook for the Australian economy see the Australian Dollar exchange rate pick-up?
Global Covid-19 developments and US-China relations will remain in focus. If risk sentiment sours, then the AUD/GBP exchange rate would fall.
The Pound Australian Dollar exchange rate could head higher this week if UK Covid-19 cases continue to fall. Any indications of daily infection rates falling along with hospitalisations would be GBP-positive.