The British pound is higher against the Australian dollar on Thursday.
- Sharp declines in global stocks after Federal Reserve meeting
- China urges Australia to take a ‘hard look’ at problems
- Fears of second wave of virus infection in US
- Pound-Aussie exchange rate is +0.90% this week
GBP/AUD was up by 140 pips (+0.77%) to 1.8350 as of 4pm GMT.
The currency pair put in an early low at 1.815 and rallied over 200 pips to highs of the day just above 1.835. Yesterday the exchange rate fell -0.39%.
GBP: Pound bolstered by Aussie unwind
There have been some assets that have done especially well in the ‘risk-on’ or ‘re-opening optimism’ trade that has done well over the past few weeks – one of which was the Australian dollar. So as other markets like stocks dropped; the Australian dollar fell too – and more so than the British pound.
As US stock markets looked at the possibility of the worst daily performance since April, the pound was pressured too, but just less so than the Aussie dollar. Among US stock markets, it was the Dow leading the way to the downside, falling over 1000 points.
AUD: Risk-on trades unwind
The major economic data release of the day was US jobless claims. Initial jobless claims were in line with expectations at 1,542,000 vs. 1,550,000 estimated. If there was a source of disappointment in the data it came from ‘continuing claims’ – that’s the number of people still claiming benefits – which at 20,929,000 came in higher than the 20,000,000 estimate.
Added to the fears generated by yesterday’s Fed meeting was the fear that protests in the United States increase risk of second wave of infections. There is some evidence that certain hotspots are trending in the wrong direction. For example, Texas reported its highest one-day count of new coronavirus cases at 2,504 cases and Florida reported 8,553 new cases on the week, its highest so far.
Deteriorating relations between Australia and China have been coming into focus. On Thursday China said it “urges Australia to take a hard look at the current problems” in reference to the apparent mistreatment of Asians during the pandemic.
