The British pound is lower against the Australian dollar on Monday.

  • Chinese investment in Australia drops -58% in 2019
  • COVID Merger: AstraZeneca in possible tie-up with Gilead
  • FX markets rest after US jobs data volatility
  • Sterling-Aussie (GBP/AUD) exchange rate -1.86% last week

GBP/AUD was down by 48 pips (-0.26%) to 1.8140 as of 4pm GMT.

Gains in the currency pair were capped twice at 1.824, turned lower to test 1.81 and later rebounded but was still lower on the day.

GBP: Pound drops as ‘risk trade’ eases

Volatility overall in foreign exchange markets was subdued on Monday with traders pausing for breath after last week’s blowout US jobs report, while possibly sitting on their hands before Wednesday’s Fed meeting. In the broader markets the ‘risk trade’ that had propelled the pound higher last week was in modest reverse.

The pound was pressured as Bank of England Chief Economist Andy Haldane described UK economic activity has having ‘collapsed’, referencing a “possibly unprecedented level of inactivity in the labour market” with 8 million British workers on furlough schemes.

Chart-watchers are paying attention to the GBP/USD exchange rate, which is sitting right at its 200-day moving average.

Elsewhere, talk of a merger of British/Swedish pharmaceutical firm AstraZeneca and US biotech company Gilead Sciences captured investor’s imagination as a one-stop-shop for COVID-19 vaccines and treatments.

AUD: China investment in Australia tanks

The pound is still perceived as riskier than the Aussie and had made a late recovery last week so was easing back a little by Monday. Nonetheless some dark clouds were on the horizon for Australia’s economy with respect to its relations with China.

Chinese investment in Australia was cut in half across 2019, taking it to a decade low. Relations between Australia and China have soured since the former led the calls for an investigation into the origins of the coronavirus, a politically-sensitive topic for China where the virus originated.

The investment-drop pre-dates the souring rations and is matched in other western nations following a tightening up of investment screening measures in China in order to restrict Chinese fund flows offshore.