GBP/AUD Seeking to Rebound After Bearish Start of the Week

GBP/AUD is slightly increasing in early trading on Wednesday, but the pair is still bearish. Currently, one British pound buys 1.9344 Australian dollars, up 0.06% as of 7:00 AM UTC.

During the first two days of the week, the pair has lost over 1.80% as the markets were discussing the post-Brexit debate between UK Prime Minister Boris Johnson and European leaders.

Up until recently, the Aussie maintained its bullish stance backed by a series of positive economic data.

Yesterday, IHS Markit said that Australia services purchasing managers’ index (PMI) rose last month to 50.6, from 49.8 in December, suggesting a slight increase for the first time in three months. Business confidence increased to a four-month high.

Elsewhere, the Australia Industry Group (AIG) said that the decline in construction index eased last month. The indicator rose by 2.4 points to 41.3 in January.

Peter Burn of AI Group commented:

“While continuing to perform weakly, the Australian construction sector declined at a slower pace in January. The house building sector expanded for the first time since mid-2018 after stabilising in the closing months of last year. Other sectors continued to disappoint with apartment building down for the 22nd straight month; engineering construction continuing the weak patch that began in the middle of 2019; and commercial construction capping a year and a half of monthly declines.”

The Aussie also reacted positively on comments made by Reserve Bank of Australia (RBA) Governor Philip Lowe, who said that further rate cuts wouldn’t be welcomed considering the risks. He also stated that the economic impact of the coronavirus outbreak in China and bushfires is only temporary.

“In assessing the impact of this (bushfires) on the Australian economy as a whole we have taken into account that there will be a material rebuilding effort and that government grants and insurance payments will assist many people,” Lowe said.

Nevertheless, the central banker admitted that there would be a visible impact on the December and January performance.

While Lowe believes that lower interest rates could help the Australian economy in general, he feels that this could potentially lead to a housing bubble.

Earlier this week, the RBA maintained the cash rate unchanged at 0.75%.

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