The British pound is higher against the Australian dollar on Wednesday in a second day of huge market moves. Traders have had to quickly reverse bets there would be a UK rate cut after successive releases of better-than-expected UK economic data. More broadly, markets saw fears recede over the spread of the coronavirus in China despite reports in can mutate and has spread to the United States.
GBP/AUD was higher by 110 pips (+0.58%) to 1.9168 with a daily price range of 1.905 to 1.917 as of 2pm GMT, with the currency pair making a fresh 2020 high. If gains continue, the British pound might soon be worth two Australian dollars.
There was no top-tier economic data on offer today but signs of higher manufacturing confidence from the CBI triggered a rush to buy Sterling. The Confederation of British Industry (CBI) ‘Quarterly Business Situation index’ which gauges optimism in UK manufacturing was at its highest since 2014. At the same time, the institute’s ‘Headline order book’ balance rose to a level last seen in August.
Currency markets have been injected with an unexpected bout of volatility in the last fortnight thanks to perhaps ill-judged comments from some UK-based central bankers. In various speeches it was inferred that the UK benchmark interest rate might need to be lowered in response to the sluggish economy. The message appeared coordinated to give market participants the impression an interest rate cut was coming soon, perhaps as early as the next meeting.
Just in the last twenty-four hours, well-received economic data, most notably showing the employment rate at its highest on record has forced traders to row against the impression they might have been given by central bankers. Markets have moved from pricing a rate cut to 50/50 odds to the present situation where rates being kept steady looks most likely.
While the losses have been large against the pound, the Australian dollar was more muted against other currencies as traders wait for Australian unemployment statistics tomorrow. It will be one of the first major economic data releases since bushfires really got out of hand, becoming a national crisis for Australia in December.