Overnight we have seen the latest Australian employment data with some mixed reports suggesting that whilst the unemployment rate did not rise as much as expected, rising from 5.2% to 6.2%, rather than the predicted 8.3%, we saw a record increase in the number of Australians out of work, at 594,300.
Strangely, the Australian dollar has not been majorly affected by this news, perhaps because as discussed in yesterday’s report blog the market is more focused on the actual response to the Coronavirus and likely economic performance ahead, as opposed to the actual economic data now.
Nevertheless, the data does point to some quite alarming statistics for Australia with the number the largest since 1994. Another positive here is the $130bn JobKeeper package by the government which the Sydney Morning Herald reports has kept many in work even if they are not working.
Longer term, poor unemployment data begins to have a knock-on effect in the wider economy as consumers spend less and pay less taxes. I wrote yesterday too about tensions with China at present and with Australian beef being banned by China, there are some warning signs ahead for the Australian economy.
A big positive for the Australian economy at present is that it has weathered the Coronavirus storm quite well having only reported 97 deaths. There is a growing concern over what lies ahead for many other countries like for example the UK which has reported over 50,000 deaths.
Whilst any death is tragic, the fact Australia has been able to contain the virus much better than some other countries does paint the country in a much better better light.
Global Sentiments Have Been Key for the Australian Dollar Forecast
The sentiment described above on a country’s response to the Coronavirus has been crucial to the performance of many currencies. The currency market has been looking more at how individual countries and the global economy has been responding to tackling the virus, than looking too much at individual economic performance.
This helps explain why GBPAUD levels have drifted lower from near 2.05 on the interbank rate on the 4th April to now 1.8962 today. This 8% movement in favour of any clients selling Australian dollar for pounds is perhaps reflective of the more positive sentiment towards Australia and its tackling of the virus, versus the UK which is now one of the worst affected after the United States.
In perhaps more normal times the releasing of the dire economic news we had for the UK yesterday would see the pound under real pressure. Sterling did ultimately lose ground yesterday on the release of the latest UK GDP data which showed a -2% decline for Q1 of this year.
GBPAUD levels were not majorly moved however, and it has been a similar story today with the release of the poor employment data outlined above. GBPAUD levels have so far today been trading in a fairly tight range of 1.9009 to 1.8914 on the interbank rate, not particularly volatile given the serious news we have had.
What Should we Look for to Determine the GBPAUD Forecast?
From now on, it appears a close monitoring of the individual countries response to the virus will be key, unfortunately the damage has largely been done in many countries. For example, the UK cannot now just suddenly reverse the terrible death count, nor are Australia likely to see any major escalation in cases, because of the containment so far.
An interesting topic will be the subject of reinfections, and whether countries around the world which are now easing restrictions will see an increase in new cases as the virus has a chance to spread.
It has been reported Germany, South Korea and China all experienced new cases after easing the lockdown and the currency markets might well be closely monitoring whether the UK and Australian outlooks change too. It is likely that any fresh new cases and signs that the virus is spreading again would prove detrimental to the value of the currency.
GBPAUD levels are testing lower points as Australia outperforms the UK in its tackling of the Coronavirus. However, with Australia dollar exchange rates also very sensitive to more global issues, and their relationship with China under the spotlight, there could be causes for concern ahead.
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