GBP/AUD continues to increase on Friday, though at a slower pace. The pair is currently trading at 1.9173, up 0.07% as of 6:40 AM UTC.
The pound has been much stronger this week, gaining 1.27% against its Australian counterpart since Monday. The British currency has been driven by better-than-expected labor market data and sentiment across factories. The optimism resulted from those releases prompted investors to cut their bets on the chance for an interest rate cut by the Bank of England next week.
Recently, IHS Markit released preliminary January data for the Australian purchasing managers’ index (PMI) in the manufacturing and services industries. The surveys, prepared by the Commonwealth Bank (CBA), pointed to a decline in both industries. Business activity showed that sharpest drop since the survey started in May 2016. Nevertheless, other components of the manufacturing PMI showed better results.
CBA chief economist Michael Blythe commented:
“The January “flash” results show the softness in the Australian economy at the end of 2019 has spilled over into the early part of 2020. There is some fundamental weakness in the Australian economy associated with consumer constraint, the residential construction downturn and the reluctance of business to invest.”
Blythe added that the PMI results have also been negatively impacted by the bushfires, which have killed 27 people and burned millions of hectares of land and forests.
Manufacturing flash PMI in January fell to 49.1, from 49.2 in December. Services PMI contracted to 48.9, from 49.8 in December.
The Aussie is under increased pressure also because of an outbreak of a new virus in China. The new strain of a coronavirus, which started in the city of Wuhan, has already killed 25 people and infected over 800. China is the greatest source of tourists for Australia, which adds to the fears of an imminent outbreak. Australia’s federal government said that several people are tested every day for the virus.
Health authorities in New South Wales were monitoring four potential cases of the coronavirus while two people are being tested in Brisbane. However, according to chief medical officer Brendan Murphy, no cases have been confirmed yet in Australia.
