Updated: (16:45 03/08/2021) The Pound (GBP) fell against the Australian Dollar (AUD) later this afternoon after it was reported that UK Covid-19 deaths had risen to 138, its highest daily rate since 17 March. The pairing is currently fluctuating around AU$1.88.
As a result, GBP investors have become more concerned that rising deaths from the virus could prompt another lockdown later this year.
Meanwhile, the Australian Dollar (AUD) has continued to benefit from yesterday’s bullish monetary policy statement from the Reserve Bank of Australia’s Governor, Philip Lowe.
Pound Australian Dollar Exchange Rate Falls, RBA Agrees to Go Ahead with Tapering Bond Purchases
The Pound Australian Dollar (GBP/AUD) exchange rate fell by -0.3% this morning following the Reserve Bank of Australia’s (RBA) interest rate decision, which confirmed consensus and remained at the record-low of 0.1%. The pairing is currently fluctuating around AU$1.87.
However, the RBA surprised markets by announcing that it would go ahead with tapering bond purchases from the beginning of September, despite concerns for the nation’s economic recovery.
RBA governor Philip Lowe said:
‘The recent outbreaks of the virus are, however, interrupting the recovery and GDP is expected to decline in the September quarter. The experience to date has been that once the virus outbreaks are contained, the economy bounces back quickly.’
Damien McClough, head of rates strategy at Westpac and Robert Rennie, head of financial marketing at Westpac, commented:
‘[T]he RBA appears to be looking through the current delta breakout in New South Wales… Not surprisingly, the [Australian Dollar] has jumped sharply, and could jump further still.’
As a result of the RBA’s bullish attitude, demand for the ‘Aussie’ has risen because of rising confidence in the outlook for the Australian economy.
Pound (GBP) Exchange Rate Falls Despite Falling UK Covid-19 Infections and Deaths
The Pound (GBP) is effectively rudderless today because of a lack of UK economic data. But growing confidence in the nation’s Covid-19 situation could buoy-up Sterling later in today’s session.
Jamie Jenkins, former head of health statistics at the Office for National Statistics (ONS), commented:
‘[Cases] in England and Wales have been coming down since July 19, the cases have been falling for a couple of weeks there, then you get that time-lag effect when cases start coming down you get, around five or six days later, you start seeing hospital admissions come down, and then you start seeing deaths come down.
‘I think looking at the data, we normally see deaths peaking around 14 days after cases come down, I think we might start being over the hill now when it comes to deaths.’
Consequently, Pound investors are becoming more confident about the outlook for the economy, with hopes that falling Covid-19 infections could see an economic rebound in the months ahead.
Nevertheless, many experts have recommended cautious, with cases expected to rise in autumn and winter.
GBP/AUD Exchange Rate Forecast: Could Strong Australian Retail Sales Drive-Up the ‘Aussie’?
Australian Dollar (AUD) investors will be looking ahead to Wednesday’s release of June’s retail sales data.
Any improvement in the outlook for Australia’s retail sector would further buoy the AUD/GBP exchange rate.
Tomorrow will also see Australia’s July Commonwealth Bank services PMI. Could an uptick in Australian growth further boost the ‘Aussie’?
Risk sentiment will be a key factor for the Australian Dollar’s direction against the major currencies this week, however.
If the outlook for the Chinese economy deteriorates or the Delta coronavirus continues to spread, then we would see the risk-averse ‘Aussie’ suffer.
Pound investors will be looking ahead to Thursday’s Bank of England (BoE) interest rate decision.
Although the bank is forecast to hold rates at 0.1%, a bullish statement would uplift the GBP/AUD exchange rate.