- Pound (GBP) under pressure after data reveals that the coronavirus hit to the UK economy was worse than forecast in Q1,
- Brexit talks and Boris Johnson’s fiscal stimulus in focus
- Australian Dollar (AUD) lower on building virus risk
- Pound Australian Dollar exchange rate trades comfortably below 1.80
The Pound Australian Dollar is edging +0.1% higher at 1.7934 after the pair settled on Monday -0.4% at 1.7915.
The Australian Dollar is under pressure as risk aversion once again dominates amid persistent coronavirus fears. The World Health Organization has warned that the worst is yet to come in the coronavirus pandemic. The warning comes as areas of the US roll back reopening measures, while the UK and parts of Europe re -impose localised lockdown measures in an attempt to stem the spread of flare ups.
In Australia, Victoria continues to see the daily number of coronavirus cases rise, meanwhile thousands of residents have been ordered back into lockdown as the state battles a second wave.
Aussie Dollar losses are being capped following encouraging Chinese data overnight. Official data revealed that Chinese manufacturing activity expanded in June at 50.9, ahead of the 50.4 forecast. The level 50 separates expansion from contraction. The numbers combined with yesterday’s improving industrial profits numbers show that the economic recovery in China is gaining traction. This is offering some support to the risk sensitive and China proxy, the Australian Dollar.
The Pound is trading broadly lower versus its peers, although higher versus the riskier Aussie Dollar. The Pound is out of favour after data revealed that the UK economy slowed by the most in 40 years in the first three months of this year, as consumers slashed their spending in the first few days of lockdown.
GDP dropped -2.2% in the first quarter of the year compared to the previous quarter according to the Office of National Statistics, worse than the -2% contraction originally expected.
Boris Johnson will set out his plan to get the UK economy moving later today. He is expected to announce fiscal stimulus to the tune of £5 billion aimed particularly at infrastructure developments.