GBP/AUD Moving Sideways Just Below 2.00

GBP/AUD has lost all of its Monday gains when the pair surged over 2.70% in the first hours of the day. The bearish reversal started yesterday. Currently, the sterling and Australian dollar pair is trading at 1.9913, down 0.10% as of 7:00 AM UTC. It has moved sideways during the last few hours.

Australia’s Business and Consumer Confidence Are Down

The Aussie would have probably managed to extend the recovery, but it has been under pressure as the Australian business and consumer sentiment deteriorated in February, dragged down by the coronavirus outbreak. The country’s gross domestic product (GDP) might fall into recession for the first time in almost 30 years.

National Australia Bank’s measure of business conditions dropped to 0 last month from +2 in January. The survey’s gauge of business confidence tumbled to -4 from -1.

In the survey, NAB asked companies whether they had any impact from the coronavirus epidemic. About half of the businesses admitted that they experienced some consequences. NAB’s chief economist Alan Oster commented on the figure:

“It is very possible this number will rise as the spread of the virus continues – this would most likely result in a further deterioration in confidence and eventually reported business conditions.”

Australia has reported three people dead from the coronavirus so far. The country’s tourism and education sectors have been the most affected.

In light of the outbreak, economists are expecting the first recession in three decades, anticipating a contraction in the first two quarters of 2020.

A separate report released earlier today showed that consumer confidence dropped 4.2% last week.

David Plank of ANZ Banking Group commented:

“Fear about the near-term economic outlook is driving the weakness. This highlights the challenge facing the federal government as it finalises its soon to be announced stimulus package.”

The Reserve Bank of Australia has already cut its interest rate from 0.75% to 0.50%, updating the record low. Besides this, the government is about to release a fiscal stimulus package later this week, though no details are available at the moment.

Despite everything, the Aussie manages to stay strong against the sterling, which is also affected by the coronavirus panic in Europe.

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