AUDGBP Strengthens Against but AUD Lower Against USD and EUR

AUD GBP Trades Above 0.5300 Ahead of Consumer Confidence

The Australian dollar, for the first week into September, has shown mixed strength against its major currency counterparts so far amidst steep increases of COVID-19 cases and deaths. Surprisingly, the AUD to USD exchange rate, which had been enjoying continuous growth since mid-March, has now seen the currency pairing weaken by 1.5 cents between the start of September and today. Even the USD to EUR rates have dropped despite the previous few months of stagnated movements. The pairing has so far lost 0.6 cents this month. It seems only the AUDGBP exchange rate has been beneficial for the antipodean currency over the past week as it has gained 1.8% moving up a cent from 0.548 to 0.558 at time of writing.

Unfortunately, for the AUDGBP pairing, most of this currency volatility can be attributed to weakness for Sterling as the news recently came in that a Brexit free trade deal between the EU was seeming increasingly unlikely. Even the US dollar and Euro have not had any particularly positive news emanating from either corner of the world. This suggests that more of this movement could be based off of increasing global uncertainty which ties into both the pandemic as well as the mounting tensions between Australia and China amidst diplomatic standoff and the accused raiding of journalist’s homes.

Political Uproar Between Australia and China Increases Tensions

This follows two Australian journalists being flown out of China last week concerning their well-being as they accused Australian press of trying to expose governmental secrets and said that its “national security” was at risk. The political relationship between the two nations has deteriorated this year following the Coronavirus outbreak and the fall-out from the pointing of fingers as Australia attempted to prompt an investigation into the reasons why the pandemic began.

As the Australian dollar is a commodity currency, it has tendencies to be quite sensitive to global unrest or uncertainty with the markets which is one of the reasons to explain the AUD weakness recently. Alongside this is the economic recession that has settle in in the country down-under as the state of Victoria which suffered high levels of new cases last month had to be shut down and implement curfews which will damage the revenue sources for bars and restaurants in its hospitality sector.

Economic Data Light on the Ground This Week but Increasing Unemployment Predicted Next Week

There isn’t any volatility-causing data out this week for the AUD but next week could be more promising as Tuesday will bring the Reserve Bank of Australia (RBA) meeting minutes to give an insight into economic policy and sentiment within the economy moving forward for the rest of this year. Depending on the bullish or bearish nature of the speech could create some movement for the currency.

Thursday could be one to bring some weakness for the AUD and certainly one to watch as the employment change and unemployment rate figures arrive. Following the 110k jobs that were gained back in June, the following month is predicted to see it slump to just 40k whilst unemployment is predicted to rise slightly from 7.5% to 7.8%. This reduces the economic output of the country and could have a knock-on effect on GDP. More depressing news is set to arrive in due course as the RBA are also predicting that wage growth will stay plateaued until the middle of next year which means it is unlikely to see the economy bounce back as quickly as other countries who have also been hard-hit by the virus.

Get in touch using the form below to discuss these factors in more detail and the options available to limit your exposure to volatility in the markets.