The British pound is higher against the Australian dollar on Tuesday.
Quarter-end repositioning as well as rumours about a possible extension to the Brexit transition period have given Sterling a boost.
The Aussie continues to tread the path between an improving situation in China and a worsening one at home after China manufacturing reported an unexpected expansion in March according to purchasing managers.
GBP/AUD was up by 187 pips (+0.92%) to 2.0311 with a daily range of 1.9869 to 2.0373 as of 5pm GMT.
From a low of 1.99 to over 2.03, GBP/AUD had a daily range of over 500 pips, taking the weekly return into the black by +0.56%.
British pound gains on Brexit transition extension rumours
Month-end rebalancing for major firms, many of which will be doing so through the City of London maybe adding some demand for Sterling.
The bigger cause of the midday surge might be rumours that PM Boris Johnson will be forced to extend the Brexit transition period. It has not be admitted at an official level in the UK, indeed a spokesperson for the Prime Minister said the December deadline remains ‘enshrined in law’ but in private diplomats are saying talks have ground to a halt. Understandably meetings cannot take place and civil servants that were working on the talks have been redeployed to deal with the coronavirus.
The final reading for UK fourth quarter GDP was 0.0% q/q, in line with preliminary estimates. A recession is close to guaranteed for the UK across Q1 and Q2.
Australian dollar knocked as consumer confidence plummets
There was mixed news for China, Australia’s biggest consumer on Tuesday. Official Manufacturing PMIs rose into expansion territory in March. However domestic data was much worse.
Australian weekly consumer confidence crashed again on Tuesday, hitting a new low of 65.3, down from 72.2 this time last week. It raises a big question not only for Australia but the global economy, if the consumer is n such a state of shock, even if they stay in employment or receive wage subsidies, how much discretionary spending can we really expect once the pandemic recedes?
