GBP/AUD is declining on Tuesday, though the pair is still moving inside a bullish channel that started on January 13. The pair is currently trading at 1.9284, down 0.10% as of 6:25.
The pound has gained about 2% during the rally that started in mid-January. It remains to be seen whether the correction will end up in a trend reversal. The cards are in the sterling’s hand for now, as the Aussie is affected by several factors at once, including bushfires and the coronavirus from China.
Earlier today, National Australia Bank’s NAB index of business conditions fell one point to +3 in December, suggesting that activity weakened in the last month of 2019.
NAB’s survey of business confidence declined 2 points to -2 amid weakening sales and profitability. The only positive component of the index was employment, which maintained at +4 in December.
NAB Group Chief Economist Alan Oster commented:
“Conditions continue to imply a stalling in the private sector and we think that the survey suggests that there was another weak outcome in the December quarter. For now, the survey has not showed clear evidence of a bushfire impact, but the more significant impact is likely to have occurred in January.”
According to Oster, while conditions seem to have bottomed, the indicators suggest they are going to remain weak. He anticipates that more policy stimulus will be required to support the economy over 2020. The Reserve Bank of Australia (RBA) cut interest rates three times in 2019, to a record low at 0.75%. Investors are expecting another cut by the end of the first half of 2020. So far, the RBA’s stimulus has only boosted home prices, failing to support consumer spending.
Australia is still under pressure amid official warnings of returning bushfires. Residents of eastern states were told to strengthen fire defences.
The pound started to decline against a weakening Australian dollar after European Union’s chief Brexit negotiator Michel Barnier said that the UK would need much more time than the current transition timeline whose deadline is set for December 2020. It means that a no-deal Brexit is still very likely under these circumstances.
