Pound Australian Dollar (GBP/AUD) Exchange Rate Falls as ‘Aussie’ Buoyed by Europe’s Easing Covid-19 Cases

April 20, 2020 - Written by John Cameron

STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Falls as ‘Aussie’ Buoyed by Europe’s Easing Covid-19 Cases

GBP/AUD Exchange Rate Sinks as China Props Up Economic Activity

The Pound to Australian Dollar (GBP/AUD) exchange rate fell by -0.5% today, with the pairing currently trading around AU$1.957.

The Australian Dollar (AUD) edged higher today on rising hopes over coronavirus cases and fatalities easing off in Europe, particularly in heavily hit nations like Spain and Italy, while Germany and France are also taking cautious steps to easing their respective lockdown measures.

Today also saw the People’s Bank of China (PBoC) cut its benchmark lending rate to cut borrowing costs for companies to bolster the Chinese economy.

Martin Rasmussen, an economist for China at Capital Economics, commented:

‘It is easy to dismiss such a small fall in borrowing costs as insignificant for struggling firms. But the [People’s Bank of China] has been easing monetary conditions through a range of other tools recently, too.’

‘The latest rate decline should be viewed as yet another sign that authorities have become serious about monetary easing. As employment conditions remain weak and external demand held back by lockdowns, we think the People’s Bank will take further steps to prop up activity.’

With China being Australia’s largest trading partner, any signs of improvement in the Chinese economy boosts the risk-sensitive Australian Dollar.

Pound (GBP) Sinks on Covid-19 ‘Second Peak’ Fears

The Pound (GBP) fell today on rising fears over the UK’s coronavirus crisis after Prime Minister Boris Johnson amplified concern over the lockdown by saying that we could see a ‘second peak’ if current measures were to be lifted too soon.

A spokesperson for Downing Street said:

‘The big concern is a second peak. That is what ultimately will do the most damage to health and the most damage to the economy. If you move too quickly, then the virus could begin to spread exponentially again. The public will expect us to do everything we can to stop the spread of the virus and protect life.’

Today also saw HIS Markit’s Household Finance Index fall to its weakest since November 2011, with the figure plummeting to 34.9 in April.

IHS Markit said in its release statement:

‘With a large degree of uncertainty surrounding the time frame to which the emergency public health measures will be maintained, financial wellbeing expectations also fell sharply. Overall, the respective index signaled the strongest level of pessimism for almost eight-and-a-half years.’

The Pound (GBP) opened this week trading down against many of its peers as the UK’s coronavirus crisis continues despite easing an easing number of cases in other key European countries.

GBP/AUD Forecast: Could Weak UK Unemployment Figures Send Sterling Plunging?

Australian Dollar (AUD) investors will be awaiting tomorrow’s speech from Philip Lowe, the Governor of the Reserve Bank of Australia (RBA). Any dovish comments about the Australian economy, however, could send the ‘Aussie’ spiraling downwards.

Tomorrow will see the release of the UK ILO Unemployment Rate report for February. If this rises above forecasts, we could see the Pound fall as this would paint an even darker picture for March and April, when the coronavirus more firmly gripped the British economy.

The GBP/AUD exchange rate will remain sensitive to Britain’s Covid-19 developments this week, with any signs of an increasing number of cases further weakening Sterling.

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