The AUD to GBP exchange rate was 0.30% lower on Thursday after traders finally made a decisive move on the pound. Australia is still virus-free, but the pound is seeing gains as its vaccination program continues to raise the prospect of reopening the economy.
AUDGBP is trading at 0.5580 after the pair finally took out the support levels at 0.5600.
Pound Shrugs off IMF Predictions
The IMF downgraded their outlook for the UK economy this year after the latest virus outbreak. The IMF said in its latest forecast that Britain’s GDP would expand by 4.5% this year, which is 1.4% lower from their forecast in October.
The latest prediction is based on the current outbreak of the virus and the government lockdowns that followed. Despite the lower numbers, the UK is on course to reopen its economy faster than other nations and some of the late-2020 damage in the exchange rate is now being unwound as analysts move back to comparisons over economic data. Britain’s Health Secretary confirmed yesterday that 78% of over-80s had received their first shot of the virus vaccination, with around 7 million already vaccinated across the country.
The IMF report was positive for Australia with an upgrade for the country and the expectation that China will have the world’s best growth in 2021 with 8%. The Australian economy has been supported by the quick rebound in China with iron ore prices being a highlight for prospects down under. Tariffs on products applied by China have affected a diverse range of Australian products, from wine to barley exports. The disagreement was created by Australia’s criticism of the country’s handling of the coronavirus at the outset.
Aussie Shares Hit on Dow Jones Losses
Australian shares were lower after the US markets were down, with the leading Dow Jones index lower by 630 points. Investors are turning cautious on stocks over fears of high valuations and fact that the virus is dragging on longer than expected.
The Australian benchmark ASX 200 dropped almost 2 per cent on Thursday, despite the lower Aussie dollar. The Australian economy has been boosted by higher commodities, but the US dollar is at risk of a recovery bounce and that would take some of the steam out of the country’s economy.
The AUDGBP exchange rate outlook could be one of the first pairs in the developed nations that starts to focus again on economic fundamentals, rather than flu rates.
AUD to GBP will now look to test further support levels with the 0.5500 price being the next target. The pair saw a November low of 0.5400 while the Mid-March lows at the onset of the virus are further away, at almost 0.4800. Sterling never saw any real follow-through from the signing of the Brexit deal due to the virus and there is potential for the currency to gain if they start seeing some wins in new trade deals.
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