The British pound is higher against the Australian dollar on Tuesday afternoon following the release of UK employment stats that cast doubt on the potential plans by the Bank of England to lower interest rates. Additionally, Australia’s proximity to China leaves it exposed to a virus outbreak that has claimed the lives of six people and is reported to have spread overseas.
GBP/AUD was higher by 109 pips (+0.58%) to 1.9028 with a daily price range of 1.889 – 1.904 as of 2pm GMT, with the currency pair making a 11-day intraday high above 1.90.
Assets across Asia, including the Australian dollar have born the brunt of a global selloff on Tuesday brought about by fears surrounding a new coronavirus in China. There are fears the virus could be as deadly as SARS, which at the time caused a panic across markets.
The outbreak was first detected, and is thought to have started in Wuhan, China and people from the city now face extra screening before travelling as authorities take precaution against the spread of the disease. There are more than 200 cases of the disease, which includes other Asian counties in including South Korea, Japan and Thailand.
Chinese Authorities have stated that the coronavirus is contained and if that proves correct, then the selloff in the Aussie could reverse, as could flows into haven assets like gold and the Japanese yen. Otherwise if the coronavirus cases start to pop up major international capitals, including Europe then the selloff in China-sensitive assets could deepen.
Voting at next week’s Bank of England meeting looks like it could be fairly balance so it is all to play for on the incoming UK economic data. The pound surged on Tuesday following a UK employment report that painted a rosy picture of the British economy, not something typically associated with lowering interest rates.
The data was mostly in in line with upbeat expectations, but the positive surprise came from wages which rose 3.2%, when consensus estimates were for a 3.1% fall. The UK added 208,000 jobs in the three months through November and the unemployment rate was steady at 3.8% according to the UK Office for National Statistics (ONS).