- Chinese – Australian tensions rise amid accusations of racism, dragging on Australian Dollar (AUD)
- Australian business confidence improves but still at levels associated to recession
- Pound (GBP) rises as UK economy reopens & BRC retail sales improve
- At 09:15 UTC, Pound to Australian Dollar (GBP/AUD) trades +0.9% at 1.8290
The risk on rally kept the Australian Dollar well supported in the previous session. The Aussie Dollar settled +0.25% stronger versus the Pound, at 1.8124.
However, the Aussie Dollar has been unable to sustain this strength. At 09:15 UTC, GBP/AUD is trading +0.9% at 1.8290. This is towards the upper end of the daily traded range of 1.8110 – 1.8322.
The leg lower in the Australian Dollar was triggered by escalating tensions between China and Australia. Tensions have been brewing between the two trading partners for some weeks, ignited by Australia supporting a formal investigation into the origins and spread of coronavirus in China.
Since then China has stopped buying meat from some Australian abattoirs among other moves. The most recent risk aversion has been triggered by China accusing Australia of racial discrimination against Asian students.
Despite today’s sell off the Australian Dollar has still advanced over 10% against the Pound across the past 10 weeks as investors bet on a quicker recovery from coronavirus, despite data still being depressed.
Data today showed that Australian business activity and confidence improved in May after collapsing in April. However, the figures were still at levels associated with a recession.
Job ads also stabilised in May after a record decline in April. However, economists still expect weakness in the labour market for some time yet.
Sticking with domestic data, investors will now look ahead to the release of Australian consumer confidence data for further clues on the recovery.
The Pound is pushing higher as investors focus on the reopening of the UK economy. The number of coronavirus daily deaths dropped to 55 the lowest number since before lockdown, spurring on the government’s plans to ease lockdown restrictions.
All shops will open from 15th June. Restaurants and pubs will be allowed to serve outside as from 22nd June and travel corridors could open from 29th June. These plans will help to reignite UK economy after months of lock down.
Separately, retail sales from the British Retail Consortium showed that retail sales staged a rebound in May. Sales declined -5.9% compared to the year earlier, a huge improvement from April’s -19.1% decline. The data, whilst still the second worse reading on record was still a step in the right direction.
