GBP/AUD Corrects, But Aussie’s Uptick Is Not Sustainable

GBP/AUD is declining on Thursday, after gaining over 1.80% since February 20. After updating the highest level since 2016, the pair has been facing strong resistance and entered a correction phase. Currently, one British pound buys 1.9647 Australian dollars, down 0.34% as of 8:15 AM UTC.

However, today’s bearish move is likely driven by technical analysis factors that may prove to be temporary. From the perspective of fundamentals, the Aussie is actually in a more unfavorable situation compared to the pound.

While the sterling is struggling to address the pressure caused by tensions between Britain and the European Union, the Australian dollar is dragged down by fears of a coronavirus pandemic and economic slowdown caused by bushfires.

Australian PM Foresees Pandemic

Earlier today, Australian Prime Minister Scott Morrison stated that there were clear signs that the world is moving towards a coronavirus pandemic. Australia is implementing emergency measures to control the spread of the virus, which has already infected more than 80,000 worldwide and killed over 2,700 people.

While the spread of the epidemic has slightly declined in mainland China, Morrison believes that the escalation across other Asian countries, Europe, and the Americas points to an upcoming pandemic. The PM said:

“We believe the risk of a global pandemic is very much upon us. We need to take the steps necessary to prepare for such a pandemic.”

So far, Australia has reported 23 cases of people infected with the new strain of a coronavirus, though 15 of them have been discharged from hospital.

Australian Business Investment Unexpectedly Drops

On Thursday morning, data from the Australian Bureau of Statistics (ABS) showed that business investment surprisingly dropped last quarter, dragged down by declines in the building and mining sectors.

In the three months to December, investment tumbled 2.8% to A$28.5 billion ($18.8 billion), while analysts expected a 0.4% rise. Australian companies are less confident about the future as well.

Sarah Hunter, chief economist for BIS Oxford Economics, commented on the results:

“The capex survey disappointed again. All sectors recorded a drop, with the weak economic outlook appearing to dampen investment intentions.”

Considering the fundamentals, it remains to be seen how long the GBP/AUD’s bearish move will last.

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