GBP/AUD Exchange Rate Falls as ‘Aussie’ Receives Risk-On Boost
The Pound to Australian Dollar (GBP/AUD) exchange rate fell by -0.5% today after the ‘Aussie’ benefited from the Reserve Bank of Australia (RBA) leaving its interest rates untouched at a record-low of 0.25%. The pairing is currently trading around AU$ 1.98.
Philip Lowe, the RBA’s Governor, was however dovish in his statement, predicting a rocky road ahead for the Australian economy:
‘There is considerable uncertainty about the near-term outlook for the Australian economy. Much will depend on the success of the efforts to contain the virus and how long the social distancing measures need to remain in place.’
‘A very large economic contraction is, however, expected to be recorded in the June quarter and the unemployment rate is expected to increase to its highest level for many years.’
The Australian Dollar (AUD) has also benefited from a spike in risk sentiment after Asian stock markets gained this morning, while the death toll from coronavirus in Italy, Spain and Germany have shown signs of plateauing.
Consequently, investors have flocked to risky assets on hopes that Europe’s coronavirus crisis could be slowing down. Meanwhile, the US faces its ‘peak’ coronavirus situation this week, with cases in America’s largest cities such as New York expected to increase in the coming days.
Pound (GBP) Falls on Boris Johnson’s Health Uncertainty
The Pound (GBP) struggled this morning after Prime Minister Boris Johnson was admitted into intensive care last night, following his coronavirus diagnosis over 10 days ago.
Consequently, UK markets have remained jittery as they await further news regarding the PM’s condition.
Michael Gove, a senior Conservative MP, has also gone into self-isolation. However, Mr. Gove provided some reassurance on the PM’s health situation, saying that Boris Johnson was ‘not on a ventilator’.
Today saw the release of the UK Halifax House Prices index for March, which rose to a worse-than-expected 3%. However, most buyers and sellers are likely to put activity on hold as the nation continues to battle its coronavirus outbreak.
Lucy Pendleton at the housing agency, James Pendleton, commented on the report:
‘It wasn’t so long ago that commentators talked of Brexit uncertainty putting transactions on ice, but that feels like ancient history now. Covid-19 has brought brutal new meaning to a frozen market.’
GBP/AUD Forecast: Could ‘Aussie’ Continue to Rise on Improving Risk Sentiment?
Australian Dollar (AUD) investors will continue to monitor Australia’s economic health going forward. Any further signs that the economy could take a severe downturn in the coming weeks, however, would limit the ‘Aussie’s gains.
However, with Europe’s coronavirus developments showing signs of improvement, we could see the Australian Dollar continue to be propped up by improving risk sentiment.
The GBP/AUD exchange rate will continue to be driven by Boris Johnson’s health reports this week, with any indications of an improvement in the PM’s health proving Pound-positive.
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