Australian Dollar Strength Continues as Sentiment Improves

Euro Stronger Versus the Aussie Dollar But Coronavirus Fears Could Reverse the Trend

The pound to Australian dollar exchange rate dipped for a third day running as the negative sentiment, which has clouded the Aussie continues to improve. The GBP v AUD interbank rate fell from its Tuesday close above 1.9300 to touch lows beneath the 1.9200 level.

Economic Data Moves to Other Nations

The Australian dollar has continued to see strength following the Reserve Bank’s decision to keep interest rates locked at 0.75%, which was a positive sign for the AUD after the recent losses related to the bushfires crisis which ravaged much of the country and threatened to dent economic growth.

The Reserve Bank of Australia’s Governor Lowe now makes the semi-annual statement to the Parliamentary Committee later this evening, however these Central Bank speeches tend to be well prepared to avoid any market shocks.

The market will now turn to the U.S. employment figures on Friday and for the GBP v AUD, next week brings the UK GDP release, which will be increasingly importance after Brexit has passed. The country now seeks to create new trade deals around the globe and its negotiations with Australia will be a key driver of the GBP to AUD forecast in the near-to-medium term.

Chinese Coronavirus Risks Still Dominate

The Chinese stock market saw a fourth-consecutive positive close after the panic of last week and this has contributed to the profit-taking in the GBP to AUD exchange rate. The softening of fears over the Chinese Coronavirus has led to traders believing that the panic and threat to Australia’s key trading partner was overblown.

Gold prices also stabilized after the recent sharp losses and the clearing of the impeachment threat hovering over President Trump will likely be a boost to risk assets on Thursday and a rally in stocks could be expected.

Despite the positive glow that will continue into the weekend, markets should maintain a level of caution over the hints that China’s government is downplaying the spread of the Coronavirus to maintain calm. This uncertainty should temper any enthusiasm going forward until further clarity is available. The recent moves by China to inject USD$22 billion into the market and cutting reserve ratios is a sign that they are taking the threat seriously.

For the Australian dollar, Governor Lowe’s Testimony at 22:30 GMT on Thursday will drive the near-term price in the GBP v AUD exchange and could lead to a longer trend if more clues are given on the economic effects of the bushfires, or the bank’s stance on interest rate policy.

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