GBP/AUD Exchange Rate Rises as No 10 Promises ‘Menu of Options’ to Ease Lockdown
The Pound to Australian Dollar (GBP/AUD) exchange rate rose by 0.4% today after yesterday saw Prime Minister Boris Johnson announced that the UK is now ‘past the peak’ of the coronavirus. Consequently, the pairing is currently trading around AU$1.945.
I can confirm that we are past the peak of this disease.
We are past the peak and we are on the downward slope.
And we have so many reasons to be hopeful for the long term.
But we can only defeat coronavirus by our collective discipline and working together.— Boris Johnson #StayHomeSaveLives (@BorisJohnson) May 1, 2020
Sir Patrick Vallance, Britain’s Chief Scientific Adviser, was also optimistic about the increasing number of coronavirus cases, commenting:
‘The number of new cases is down, that’s turning into fewer admissions, fewer people in hospital, fewer people in intensive care and we’re beginning to see that decrease in deaths.’
As a result, Sterling has risen now that Boris Johnson has promised to deliver ‘a menu of options’ for easing lockdown restrictions and revving up the British economy next week.
Meanwhile, Sterling has benefited from next week’s promise of a ‘comprehensive’ plan of how the UK will move on past Covid-19.
However, today saw the final UK Markit Manufacturing PMI for April fall deeper into contraction territory.
The figure slumped to a worse-than-expected. 32.6, leaving GBP investors concerned for Britain’s economic outlook going forward.
Rob Dobson, the Director at IHS Markit, commented on the data:
‘The outstanding question remains how long the current restrictions will need to remain in place, and which sectors can start to safely reopen. The pressure is mounting, as the longer the global economy remains in lockdown the greater the cost to industry will grow, and the greater the likelihood that more jobs will be cut.’
Australian Dollar (AUD) Falls as Australian Home Sales Plummet in March
The Australian Dollar (AUD) fell following this morning’s release of the Australian HIA New Home Sales figure. The nation’s home sales fell considerably, with the figure easing from 6.2% to -21.1% due to the coronavirus pandemic.
Tim Lawless, the Head of Research at CoreLogic, commented:
‘Although housing values were generally slightly positive over the month, the trend has clearly weakened since mid-to-late March, when social distancing policies were implemented and consumer sentiment started to plummet.’
‘Aussie’ Struggles as Australia-China Relations Sour
Meanwhile, concerns are growing over Australia-China relations after tensions flared up this week after Australia called for a probe into Wuhan’s coronavirus developments.
As a result, this sparked fears that the two powers could decouple their economies. As a result, this would significantly weaken the Australian economy.
Mark van Dyck, the Managing Director of the Compass Group, commented:
‘To suggest that we reduce trade with China basically means we would reduce our standard of living as Australians, and reduce our ability to bounce back.’
GBP/AUD Outlook: Could Sterling Rise as the UK Forwards its Lockdown Easing Plan?
Looking ahead, Australian Dollar (AUD) investors will be awaiting Monday’s release of the AiG Performance of Construction Index for April. If Australia’s economy continues to suffer from the coronavirus pandemic, then we could see the ‘Aussie’ plummet.
Furthermore, next week will also see the Reserve Bank of Australia (RBA) announce its interest rate decision. Although, if the RBA is notably downbeat in its statement this could also weaken the Australian Dollar.
The GBP/AUD exchange rate will be driven by the UK Government’s lockdown easing plan next week. If the UK’s economy looks set for a swift recovery, then we could see Sterling rise against its peers.
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