Pound, Australian Dollar Exchange Rate Sinks
The Pound to Australian Dollar (GBP/AUD) exchange rate fell by 0.4% in forex trading this morning. The pairing is currently trading around AU$1.83.
The Pound (GBP) struggled following this morning’s release of April’s UK GDP figure, falling from -5.8% to -20.4%. As a result, Sterling traders are increasingly concerned that Britain’s economy could face an unprecedented recession in Q2. Today’s release of the UK’s industrial production figure for April shows a drop from -4.2% to -20.3%.
Meanwhile, the UK’s trade with other countries also collapsed in April. Export volumes fell by 17.7% month on month, while imports fell by a whopping 26.5%. Moreover, exports and imports fell to their lowest levels since records began in 1998.
The Pound to Australian dollar exchange rate sunk in the FX market, as UK posted its sharpest GDP decline on record. It was the UK’s industrial production that plummeted in April.
Jonathan Athow of the Office for National Statistics said that April’s fall in GDP is the biggest so far. It’s more than three times larger than last month and almost ten times larger than the steepest pre-COVID-19 fall. He also said that, in April, the economy was around 25% smaller than in February.
Virtually all areas of the economy were hit. With pubs, education, health, and car sales all giving the biggest contributions to this historic fall, he added.
Australian Dollar Rises as Risk Sentiment Improves
The Australian Dollar recovered on forex today after Thursday’s retreat in Asian stock markets. The US central bank’s (Federal Reserve) dovish outlook weighed on risk sentiment.
Daniel Been, the head of currency research at ANZ said that the Fed noted that financial conditions have improved. It limited the need for further action in the near term. But the Fed is clearly willing to do whatever is necessary, with unlimited QE being an option.
Given the recent run in the Australian dollar, consolidation is expected in the near term. This is while eyes remain on risk markets for direction.
However, the Aussie has also benefited from declining numbers of new coronavirus infection numbers and growing efforts to reopen economies. Consequently, the Australian Dollar has benefited from rising hopes that this will pay off for Australia’s export-reliant economy.
Meanwhile, Australian-Chinese trade tensions are flaring up, nevertheless, some analysts say that China can’t stop buying iron ore from Australia. This leaves investors confident that tensions may ease off in the coming months.
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