The British pound (GBP) is flat against the Australian dollar (AUD) on Wednesday.

  • US looking at $3.1 billion new tariffs on Europe
  • Europe considering US travel ban when external border opens
  • RBNZ eyes extra monetary stimulus
  • Pound-Aussie exchange rate is -0.11% this week

GBP/AUD was down by 22 pips (-0.11%) to 1.8894 as of 4pm GMT.

The currency pair fluctuated between 1.80 and 1.81 in keeping with similar directionless trading yesterday when it rose just +0.11%.

GBP: Pound acting more like EM currency than major

The pound-Aussie exchange rate has been headed overwhelmingly south lately, dropping in six of the last nine trading days.

Bank of America has described the British pound as “an emerging market currency in all but name.” The bank’s currency analyst Kamal Sharma has contrasted key financial metrics for the way the pound trades and concludes it is more like that of an emerging market than part of the G10 group of major currencies. He takes particular note of higher implied volatility and lower liquidity – which mean investors expect larger price moves but the volume of trades has fallen.

AUD: Aussie pressured alongside Kiwi dollar after RBNZ

The Kiwi dollar fell after the Reserve Bank of New Zealand (RBNZ) indicated more stimulus might be needed. The fall in the Kiwi acted a drag to the Aussie since the pair often move in sync. The RBNZ is already discussing the ‘pros and cons of expanding its LSAP’ (asset purchases) program and might look to use new tools such foreign asset purchases. The conclusion was that the New Zealand economy is improving but that ‘risks are tilted to the downside’.

Similar to Germany but on a much smaller scale than the United States, Australia has seen a small resurgence of coronavirus cases. There have been double-digit increases in coronavirus cases for the past eight days, community transmission has been rising and the ‘reproduction rate’ has risen to 2.5. The sense in markets is that the rising cases will not disturb the economic reopening, but it is a risk to monitor.

 


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