Pound to Australian Dollar Exchange Rate Slides Further as Brexit Talks End This Week

AUD GBP Trades Above 0.5300 Ahead of Consumer Confidence

The pound to Australian dollar exchange rate continues to move lower as the outlook for the global economy improves after the onset of Coronavirus. The Australian dollar which was initially hammered by Covid-19 has seen a remarkable recovery and those looking to buy pounds or US dollars with Australian dollars would be wise to review the markets and consider their options. The Australian dollar even hit a 4-month high against the US dollar this week highlighting a seismic turnaround.

Why Has the Australian Dollar Strengthened Against Other Major Currencies?

The Australian economy domestically was not impacted as badly as other parts of the world to include the UK, US, Italy and Spain. As such the economy has been able to re-open faster than some other economies with generally less restrictions, strengthening the value of AUD. Cricket is also back down under with live matches to be streamed online globally. Even the pubs have started to re-open with social distancing measures in place, but punters can still go inside such establishments if capacity rules are abided by.

The bounce in activity has also shown in the price of the ASX share market which hit a 4-month high yesterday. However, there are still so many moving parts to the global economy which could change the outlook for the Aussie. Global sentiment was supported yesterday after US jobless claims released yesterday fell for a ninth straight week suggesting thing should continue to improve.

Today’s US non-farm payroll numbers will give a very good indication as to the health of the US labour market which could be indicative of how quickly the global economy will be able to bounce back to normality. Last month in April US non-farm pay rolls declined by 20.5 million with an unemployment rate of 14.7%. Any improved outlook in the US could prove beneficial for the Australian dollar as the Aussie generally performs best when global sentiment is looking brighter.

European Central Bank’s Economic Stimulus Package Adds Support to EUR

Those with a Euro to Australian dollar requirement are seeing volatility stemming from the European Central Bank’s decision making. Yesterday the ECB announced a €600 billion boost of bond purchases to support the Eurozone with some areas having been hit very hard by Covid-19. The ECB seeks to avoid deflation and a slump that could take a long time to recover from. The EU has previously battled with low inflation and weak economic growth and Covid-19 is likely to put the recovery back. Euro to Australian dollar exchange rates were boosted slightly after the €600 billion boost was announced yesterday afternoon with rates breaking over 1.63.

Pound to Australian Dollar Exchange Rates Continue Trend Downwards

Rates for GBP to AUD tested a low of 1.856 yesterday as the pound continues to be driven lower on Brexit uncertainty as the fourth round of negotiations this week come to an end today.

This week saw the Bank of England Governor Andrew Bailey tell lenders in the UK to prepare for a no deal Brexit. The central bank must prepare for all eventualities, but it nonetheless highlights the clock is counting down as we move closer to the end of the transition period which ends 31st December 2020. With such major news this month surrounding Brexit those with pending requirements for buying or selling Australian dollars would be wise to consider removing the uncertainty from these volatile currency markets.

UK Prime Minister Boris Johnson will meet with European Commission President Ursula von der Leyen later this month where it is hoped some room to manoeuvre on both sides may be found. The politically explosive battle for the fisheries is yet to be fought and it is only matter of time before the threat of industrial action at the port of Calais could appear if Brexit talks reach a stalemate. French fishermen have an ace up their sleeve to try and apply pressure to maintain access to the UK’s fishing waters. Whilst the fishing industry contributes about 2% of the UK economy it is nonetheless a political hot potato and this battle could have far reaching consequences in the Brexit negotiations and hence the pound.

UK purchasing managers index data for the construction sector released this morning improved to 28.9 having hit terrible lows last month of just 8.2. Whilst any number below 50 highlights contraction in the sector there has still been a sharp rebound in these unprecedented times. It will be interesting to see how the UK services sector has fared in this report considering services represents such a large chunk of the British economy. Similarly for manufacturing the PMI report will give much insight for this sector. Next weeks UK Gross Domestic product numbers and industrial and manufacturing production numbers could make for an interesting end to next week for the GBP vs AUD pair.

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