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The British pound is lower against the Australian dollar on Wednesday as sentiment towards the coronavirus bounced back after a warning from Apple thanks to an assessment by the central bank in China. Meanwhile higher inflation data from the UK failed to usher in any Sterling strength.

GBP/AUD was down by 35 pips (-0.19%) to 1.9398 with a daily price range of 1.935 to 1.945 as of 3pm GMT. The currency pair was choppy all day with 1.94 as a midpoint. The daily losses bring a weekly total loss of -0.15%.

Improved global risk sentiment came to the aid of the Australian dollar

A small decline in the number of coronavirus cases and a proactive Chinese government and central bank helped lift the mood in markets. The People’s Bank of China released a statement saying the “size and duration of coronavirus impact on economy will limited” adding that “The fundamentals of China’s economy have not changed.” The soothing remarks helped the already improving risk sentiment.

Investors had started to lose faith in the official figures from Beijing about the number of cases of the coronavirus after the methodology was changed last week. But lowering interest rates and pledging further support as needed gave investors confidence that China and thus the global economy will survive.

The British pound

Data released Monday was briefly positive for the pound, but traders quickly faded the rise, sending it lower on the day. Consumer Price Inflation (CPI) gained 1.8% year-over-year above expectations of a 1.6% rise and well up from the 1.3% expected. Concerns that higher inflation will eat into consumer’s disposable income when wages are falling meant Sterling failed to benefit from the inflation figures.

Although the pound is at its best levels since 2016 against the euro, the weakness in the Eurozone economy is hurting the pound elsewhere. Although the UK has now left the European Union, its economic performance is still closely tied to Europe. Economists fear that if Germany enters a recession, the United States might gain a comparative advantage, but the United Kingdom will be dragged lower.


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