Pound Australian Dollar Exchange Rate Rises as ‘Pingdemic’ Unsettles Confidence in UK Economy
(Updated 14:00 29/07/2021) The GBP/AUD exchange rate rose today despite the NHS Covid-19 track-and-trace app contacting nearly 700,000 in one week, sparking concerns for the UK’s economic recovery. The pairing is currently fluctuating around AU$1.88.
Health secretary Sajid Javid also warned:
‘The truth is, when it comes to case numbers no one really knows where they are going to go next. I hope that the falls that we’re seeing now are sustained. That’s of course what I want to see. But we’ve already seen with the Delta variant, a new variant that emerged over the last year, that’s more infectious than the previous one, that things can change.’
As a result, Pound traders have become more cautious about the outlook for the UK’s economic recovery going forward.
The risk-sensitive ‘Aussie’ has been held back by growing concerns over the extended lockdown for Sydney, Australia’s most populated city.
Original article continues below:
GBP/AUD Exchange Rate Rangebound as UK Economy ‘Will Not Catch Up Until This Time Next Year’
The Pound Australian Dollar (GBP/AUD) exchange rate held steady this morning following the news that June’s Covid-19 ‘pingdemic’ may have stalled the UK’s economic recovery. The pairing is currently fluctuating around AU$1.88.
As a result, the Pound has struggled from fading optimism in the outlook for the British economy, with the ‘pingdemic’ expected to have slowed down the nation’s economic momentum over June and into July.
Shadow chancellor Rachel Reeves criticised the Government’s ‘lack of grip’ on the economy. Reeves said:
‘The UK had the worst economic performance in the G7 last year and isn’t bouncing back the way others are. The US has already reached pre-crisis levels of GDP per capita. The latest OECD outlook suggests Japan will be there in the autumn, and Germany early in the new year. The UK will not catch up until this time next year.’
The construction sector also reported a second month of declining activity because of EU staff returning home after Brexit and a shortage of crucial materials being available.
However, with UK Covid-19 cases continuing to fall, Pound investors are cautiously optimistic that the UK economy could recover over the next few months.
Professor Neil Ferguson, who works as an epidemiological adviser to the Government, said:
‘I’m positive that by late September or October time we will be looking back at most of the pandemic.’
Australian Dollar (AUD) Exchange Rate Steady as Sydney’s Lockdown is Extended
The Australian Dollar (AUD) failed to rise against the Pound, however, with the extension of Sydney’s lockdown weighing on confidence in the ‘Aussie’.
Extended lockdown periods throughout Australia has dampened confidence in the nation’s economic recovery, weighing on the AUD/GBP exchange rate today.
However, Australia also saw an unexpected surge in export prices, which rose up to 13.2% in the second quarter of this yer.
RTTNews commented on the data:
‘The main contributors to the rise were: metalliferous ores and metal scrap (+18.5 percent), driven by the demand for iron ore from China and constrained global supply; coal, coke and briquettes (+15.6 percent), reflecting the demand for thermal coal for household power production in Asia; and gas, natural and manufactured (+14.6 percent), due to the oil-linked contracts capturing the continued rise in oil prices in early 2021.’
Regulator crackdowns on technology companies in China also saw sharp declines in risk appetite this week, dampening demand for the risk-averse ‘Aussie’.
With China being Australia’s largest trading partner, the outlook for the ‘Aussie’ remains uncertain, with Beijing’s recent actions upsetting the outlook for Australia’s economic recovery.
GBP/AUD Exchange Rate Forecast: Could Falling UK Covid-19 Cases Drive-Up Sterling?
In the absence of any more notable Australian economic data this week, risk sentiment will continue to influence the AUD/GBP exchange rate.
Any signs of intensified regulatory crackdowns in China would further drag down demand for the risk-sensitive Australian Dollar.
However, if key economies like the Eurozone and the United States show any indications of recovery, then we could see risk sentiment steadily improve.
Pound investors will continue to monitor the UK’s Covid-19 developments this week. If infection rates continue to fall, then we would see the GBP/AUD exchange rate head higher.