australian-dollar-bank-notes- AUD

The British pound is flat against the Australian dollar on Wednesday afternoon. The impact of higher than expected inflation in Australia was diluted by anticipation of the Federal Reserve decision on US interest rates later today. More broadly risk sentiment has stabilised with stock markets and riskier currencies like the Australian dollar well-off lows of the week.

GBP/AUD was lower by 2 pips (-0.01%) to 1.9266 with a daily price range of 1.921 to 1.929 as of 2pm GMT. After dropping in the early hours of Wednesday, the pound edged higher before falling short of resistance at 1.93.

The Australian dollar

Higher than anticipated inflation in Australia help the Australian dollar further rebound from recent lows on Wednesday. Across multiple variations on the statistic, consumer price inflation rose in Australia, with the headline figure coming in at 1.8% y/y versus 1.7% expected by economists.

However the Aussie-strength lacked conviction and had completely reversed against the pound as the day went on. While the selling has eased across risky assets, there is still not a lot of desire to actively buy currencies like the Australian dollar, which is just off 3-month lows against the dollar and the Japanese yen.

The spread of the coronavirus, particularly around Asia has been the biggest downward force on the Australian dollar in the last week. Investors have been selling the Aussie on the higher possibility a virus contagion would hurt economic growth. The latest information on the coronavirus is that China has now reported more cases of the 2019-NCoV virus than SARS in 2003, the death toll has risen to 132 and the United States is weighing up a ban on all flights to and from China.

The pound

While Thursday’s Bank of England meeting is still front and centre for traders of the British pound, attentions have been temporarily diverted on Wednesday by the meeting of the US Federal Reserve. The Fed is expected to leave US interest rates unchanged, which stands in direct contrast to the Bank of England which could be on the verge of a rate cut.


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