Thursday saw trading go in favour of the pound against the Australian dollar as their exchange rate pairing (GBP/AUD) rose by 0.3%. The pairing were trading at AU$1.937 following Australia’s consumer inflation expectations report for the month of February fell under predictions, from 4.7% to 4%. The drop in AUD was also helped along by the ongoing fears concerning the coronavirus, in which more fuel was added to the fire after a spike in China’s coronavirus epidemic causing a decline of market appeal for AUD. Meanwhile, GBP looks towards its March budget boost for a rallying point to win over investors. The UK government also followed through with their cabinet reshuffle yesterday, which will alter the direction for the UK economy in the months to come.
AUD Sinks Following Weak Consumer Data and Coronavirus Fears, but RBA Remains Optimistic
The Australian dollar received further bad press yesterday after the announcement that the Australian consumer inflation expectations figures for February had dropped from the previous month. January saw the figure at 4.7%, whilst February’s number comes in at a disappointing 4%. This did not go down well with investors and saw the AUD lose support. The AUD’s weakness continued as coronavirus fears remained intact. The escalating threat to Australia’s largest trading partner (China) has threatened to derail the Chinese economy and jeopardises the recovery of the sensitive Australian, trade-reliant currency. However, the RBA’s stance on the coronavirus remains optimistic. RBA governor Philip Lowe noted that the number of people being infected is still a threat, but the infection rate is coming down, which suggests that the number of cases has stabilised. He also mentioned that he hopes this will mean the market will see a Chinese stimulus, which will be good for the Aussie economy. Despite this, the markets mood remains risk-ff for the time being.
GBP Hopes Fiscal Stimulus Can Inject Support Into Currency
The UK government saw a planned reshuffle take place yesterday. With UK PM Boris Johnson announcing a cabinet reshuffle. This saw Sajid Javid, the former Chancellor, step down to be replaced by Rishi Sunak. Downing Street now has a tighter grasp on March’s budget, which brought about cheers for the Bank of England as the recently requested an increase to public spending to stimulate the British economy. The UK announced its plans for the HS2 rail project which is one of many governmental plans to increase the fiscal stimulus in the economy moving forward.
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