GBP/AUD: Aussie Recovers Amid Fragile Coronavirus Optimism

GBP/AUD is bearish on Wednesday morning, after gaining 0.22% yesterday. Currently, one British pound buys 1.9417 Australian dollars, down 0.08% as of 7:13 AM UTC. However, the price is actually recovering right now from a daily low at 1.9395, which suggests that the bulls may win by the end of the session.

The sterling remains under pressure amid post-Brexit worries, as Britain and the European bloc are set to start trade negotiations next week. Elsewhere, the Aussie has recovered some losses amid hopes that the coronavirus outbreak in China is slowing. On Tuesday and Wednesday, the number of new daily cases was below 2,000 for the first time this month.

Australia’s Wages Index Shows Tepid Growth

Earlier today, the Australian Bureau of Statistics (ABS) said that the wage price index rose 0.5% in the last quarter of 2019, in line with analysts’ expectations. The sluggish growth is eroding the consumers’ spending power while the bushfires and the coronavirus have been affecting confidence among households and businesses.

Annual wage growth was only 2.2%, which is much lower than what used to be regarded as a standard for Australia. Growth in public sector wages grew at 2.2%, which is the slowest pace since the ABS started to publish the indicator in 1997.

The slow growth in wages might put pressure on the Reserve Bank of Australia (RBA), which already cut the interest rate three times last year to a record low at 0.75%. RBA Governor Philip Lowe has said on multiple occasions that wage growth of “three point something” was needed to boost demand and trigger an uptick in inflation. However, the last time when annual wage gains exceed 3% was in 2013.

The central bank released the minutes of its February meeting, which showed that the Board had seriously thought about further rate cuts, but the risks of even lower rates outweighed the benefits.

Nomura economist Andrew Ticehurst commented:

“The RBA – more than ever – finds itself in a bind. It is likely unable to achieve its full-employment and inflation objectives, regardless of the cash rate it chooses.”

The GBP/AUD pair might change its stance in any direction after the UK releases inflation data later today.

Currencylive.com is a news site only and not a currency trading platform.

Currencylive.com is a site operated by TransferWise Inc. (“We”, “Us”), a Delaware Corporation. We do not guarantee that the website will operate in an uninterrupted or error-free manner or is free of viruses or other harmful components. The content on our site is provided for general information only and is not intended as an exhaustive treatment of its subject. We expressly disclaim any contractual or fiduciary relationship with you on the basis of the content of our site, any you may not rely thereon for any purpose. You should consult with qualified professionals or specialists before taking, or refraining from, any action on the basis of the content on our site. Although we make reasonable efforts to update the information on our site, we make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up to date, and DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Some of the content posted on this site has been commissioned by Us, but is the work of independent contractors. These contractors are not employees, workers, agents or partners of TransferWise and they do not hold themselves out as one. The information and content posted by these independent contractors have not been verified or approved by Us. The views expressed by these independent contractors on currencylive.com do not represent our views.