GBPAUD trended down through the week as the currency pair fell more than 1.5 percent, closing the week at 1.9340. The Australia dollar had a mixed time the fall in oil prices initially caused a weakening of risk appetite and whilst Australia’s key exports are metals, the dollar weakened on the back of investor’s confidence. However, the dip was short lived, and the recovery of oil prices helped support the dollar later in the week.
Minutes from the Reserve Bank of Australia’s meeting also added support to the dollar as they confirmed a reluctance to reduce interest rates from their historic low of 0.25 percent or add any further stimulus to the economy. Economic data was mixed, March exports increased by 29 percent whilst Commonwealth Bank Purchasing Managing Index fell to 45.6 in April.
Australia has seen less than 7,000 coronavirus cases and less than 100 deaths, prompting the government to ease some restrictions this week. However, Australian Foreign Minister Marise Payne took shot at China for its handling of the crisis. With China being Australia’s largest trading partner, these comments raised temperatures and weighed on the Aussie currency.
As the Australian government now move towards lifting more restrictions, investors will watch coronavirus case numbers closely. If cases begin to rise, the dollar could find itself on the back foot again.
Brexit Talks Pick up Where They Left Off
Following a week of intense negotiations, Michel Barnier the Chief EU Negotiator has accused the UK of failing to engage and running down the clock, as he also criticised the unwillingness of the UK to extend the transition period. In the first week of non-face-to-face negotiations, the frustrations of Mr Barnier were there for all to see. His demands being met with fierce resilience as the UK refused to budge on any of its red lines.
The EU is facing a very different negotiation to that of Theresa May and Oliver Robbins. Mr Barnier is now negotiating with David Frost and his team, who actually believe in Brexit. For the first time in these negotiations, the UK has been explicitly clear on what it would like the trade deal to look like. Unfortunately, for the EU, their perfect partnership involves considerably more control over the UK. Should the UK not look to extend the transition period before 30th June, the UK will default to WTO rules in 2021 if a UK-EU trade deal is not agreed by the end of this year, a situation which would likely heap pressure on the UK currency over the coming months.
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