GBP/AUD: Pound Slightly Up But Still Struggling

GBP/AUD is edging up on Wednesday, after crashing 0.40% yesterday. The pair is currently trading at 1.8937, up 0.11% as of 5:48 AM UTC.

The Aussie strengthened yesterday after the People’s Bank of China (PBOC) cut its interest rate from 4.20% to 4.15%. Economists hope that China’s easing would benefit the global economy. Australia might be a direct beneficiary from the move as China is by far its largest trading partner.

The local dollar also found some support after Australia’s government hinted that it would inject A$3.8 billion ($2.6 billion) in infrastructure spending. On Wednesday, Prime Minister Scott Morrison is about to announce that the government would spend on rail and road projects. The move is meant to support the economy, whose growth has slowed to the lowest level in a decade amid weak home building and consumer spending.

The pound managed to slightly advance in early trading on increasing Brexit optimism. On Tuesday, market research firm Kantar published its opinion poll ahead of the election scheduled for December 12. The survey showed that UK Prime Minister Boris Johnson’s Conservative Party had a 18-point lead over the Labours. Thus, the Conservative got 45%, up 8 points compared to the last Kantar survey last week. Labour’s support was unchanged at 27%.

Johnson and Labour Party leader Jeremy Corbyn had their first head to head televised debate yesterday in the evening. The PM reiterated that he was the only one who could take the UK out of the block quickly. After the debate, polls showed that the public support for Johnson was at 51%.

Another economic update supporting the sterling came yesterday from the Confederation of British Industry (CBI), which reported that industrial trend orders increased in November, driven by the avoidance of a no-deal Brexit.

The CBI’s orders balance increased to -26 from -37 in October, while analysts expected an increase to -31.

CBI deputy chief economist Anna Leach commented:

“While the thick fog of uncertainty from a no-deal Brexit has lifted somewhat, the manufacturing sector remains under pressure from weak global trade and a subdued domestic economy. It’s clear that the outlook for the sector remains precarious.”

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