Will AUD GBP Continue to Recover Ground Lost Last Week?

Australian Dollar Gains a Cent on EUR and USD in a Week

AUD GBP has remained relatively range bound since the start of the month although we are just over 1% away from the best levels to buy pounds with Australian dollars since the start of February, with interbank exchange rates currently trending in the high 0.51s.

The Reserve Bank of Australia’s (RBA) statements after keeping interest rates on hold will have helped to further stabilise market movements, however the various political battles ongoing may be what is preventing the Australian dollar to former form in the high 0.56s.

Indeed, the governments calls for a deeper inquiry into the beginnings of COVID-19 drew a lot of criticism from China, Australia’s leading trading partner. To the point were China’s ambassador to Australia warned Chinese consumers may decide to look elsewhere when deciding where to holiday, or which wines and foods to import.

The relationship is estimated to be worth A$235 bn dollars and as such has left many business leaders to raise their worries. Given Australia is verging on the brink of it’s first recession in multiple decades, it seems unlikely the markets will be full of support for the Australian dollar should it see the country’s major trading partner step away from the table.

How Will Aussie GDP Impact AUD GBP rates this week

The Reserve Bank of Australia said yesterday it is expecting a drop of up to 10% in GDP as a result of the virus with over a million left unemployed. The timing for a political spat could not be worse as far has aussie dollar holders are concerned and is likely to impact the GBP AUD exchange rate.

Australia’s Foreign Minister Payne has since accused Beijing of holding the Australian economy to ransom during these difficult times, which certainly does not seem to have settled fears amongst business leaders so far.

On the other hand, if you have a AUD GBP currency exchange this week, Thursday’s interest rate meeting from the Bank of England could prove decisive as the week comes to an early close. Governor of the Bank of England (BoE) is expected to allude to the option of buying further debt to help pull the economy away from further economic woes. Given the speculation that the UK economy could shrink by up to 13%, investors will be waiting for clear guidance on how the BoE intend to support business owners if they are going to commit to the pound further.

Will the Australian Dollar Continue to Rise Against the Euro?

AUD has also been making persistent gains against the euro, with interbank trending upwards to recover the end of last weeks high in the mid 0.60s. It was perhaps the inflation figures released during yesterday’s trading that caused the consistent loss of confidence behind the euro at present with Eurostat’s PPI release posting a monstrous -2.8% contraction year on year for the month of March.

On the other hand, European manufacturing surveys provided by Markit Economics showed a pickup in business confidence at the start of the week, rising from the expected 30 in Italy, to hit 31.1. Germany’s figure also surprised the markets to hit 34.5 against the expected 34.4.

It will be interesting to see if this optimism is shared across Europe’s other major players including France and Spain. Their respective releases are also due out this week and so have the potential to draw further volatility to AUD EUR exchange rates.

Will AUD USD Slip to 0.63 Once Again?

However the AUD USD rate failed to recover to any substantial level the losses during the back end of last week. The AUD USD interbank rate is currently trending in the mid 0.64s. Positive price movement across multiple non-manufacturing industries may well have contributed to this with the latest ISM Purchasing Manager’s Index reading showing an impressive pick up to 41.8 from the expected mid 38s. Evidently the US economy is showing signs of resilience during this uncertain period which could also lead to a gradual pick up in confidence within global markets. This in turn could help bolster appetite for the Australian dollar in the long run too.

Importantly, the second half of this week brings with it a raft of pivotal data from the US jobs market which could hold the potential to provide further volatility to AUD USD exchange rates.

Thursday’s Initial Jobless Claims release from the US department of Labour for example is expected to fall from 3.8 million to just 3 million, which given the circumstances could help the US dollar make more ground against it’s major currency counterparts. Furthermore, if you are in the market for US dollars, Friday’s Non Farm Payrolls is also worth a watch. Historically, it has been used as an accurate gauge for economic growth in the states, given it actively tracks the number of new jobs created from one month to the next. Though we saw crushing drops during the month of march in last month’s release, investors might be watching closer to tomorrow’s figures to see how quickly businesses have adapted to the current economic climate.

Get in touch to discuss these factors and the impact they are likely to have on your upcoming currency exchange using the form below. I’ll be happy to get in touch personally and discuss your enquiry.