The AUDGBP exchange rate moved 0.40% higher on Wednesday after yesterday’s gains. The move higher was spurred by the release of the country’s Gross Domestic Product (GDP) number for the fourth quarter, which was better than expected.
The pair was trading at 0.5150 during the European trading session as traders tried to digest the recent headlines and central bank action and the implications for the Australian currency outlook.
Fourth quarter growth was positive, but the market knows it won’t last
The release of better-than-expected growth figures would normally lead to a stronger rally in a country’s currency, but traders are more concerned about what’s coming in the first and second quarter figures as the Chinese economic slowdown starts to bite.
China’s economy was already slowing due to slump in global trade. This was made worse by the U.S tariff situation and levelling of the playing field between the two countries. The bushfire crisis in Australia and the recent Coronavirus panic will only create further headaches for the Australian economy and the quarter point rate cut yesterday will likely come to late to spur activity for coming releases. The U.S. Federal Reserve went a step further and initiated a 0.50% rate cut after an emergency meeting as governments ramp up efforts to control the virus.
Governor Carney to speak in London tomorrow
The Australian currency outlook is unlikely to change much in the coming weeks. The rate cut will possibly met by a matching cut from the U.K. and the growth picture will not be know until the first quarter GDP figures are released. In the short-term it looks like the Coronavirus situation will dominate the path for the AUD V GBP.
New cases for the virus in the U.K. have risen to 51 as the country seeks to take action on halting the spread. Outgoing Bank of England (BoE) governor Mark Carney will speak tomorrow at an event in London and this could provide some clues over the bank’s next steps. Andrew Bailey, the next BoE governor has already stated that support will be provided to companies in order to tackle the virus.
“I think it is quite reasonable to expect we are going to have to provide … some form of supply chain finance in the not very distant future now to ensure that the effects of this shock from the virus are not damaging to many forms of activity,” Bailey said.
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