Pound Drops vs. Euro on Brexit Fears & Weak Manufacturing Data
  • Australian Dollar (AUD) reverses losses from the previous session following upbeat Chinese and Australian data
  • Gains capped over fears that rising covid-19 number in the US could derail the global economic recovery before it has even taken off
  • Pound (GBP) lower despite manufacturing PMI data confirming mild expansion, doubts emerge over Boris Johnson spending blitz and Brexit
  • Pound Australian Dollar (GBP/AUD) exchange rate strikes 9 month low of 1.7864 in the previous session, currently trades at 1.7935

The Pound Australian exchange rate settled on Wednesday at 1.7965. Today, at 09:30 UTC, GBP/AUD trades -0.1% at 1.7935. This is approximately mid-way between the daily traded range of 1.7910 – 1.7970.

Data is supporting the Aussie Dollar. The CBA/Markit manufacturing PMI for June hinted that the Australian economy moved into the expansion zone with a reading above 50. Analysts had been expecting the data to show the sector to be in contraction following a sharp downturn in April and May amid the coronavirus pandemic.

The better than expected Australian data comes following stronger than forecast Chinese manufacturing PMI data in the previous session, which showed that the economic recovery in China is gaining traction.

Whilst data is supportive of a more risk on mood, concerns over rising US coronavirus cases is keeping positive sentiment capped and gains in the risk sensitive Aussie Dollar limited. The number of daily cases in the US rose to 47,000 on Tuesday. As areas start to halt and roll back reopening plans, fears are growing that the economic recovery could be derailed.

Australian Dollar investors will look towards a deluge of US data later today which could drive sentiment, ahead of Australian trade data tomorrow.

The Pound is under pressure even after UK manufacturing figures confirmed activity in the sector expanded in June. Instead, doubts were emerging over the UK’s ability to pay for Boris Johnson’s huge spending spree after he announced a massive increase in public spending on Tuesday.

Brexit talks continue through the week. So far, the updates have hinted that little progress is being made, raising doubts that an outline of a deal will be ready for the end of this month. Brexit woes could keep the Pound under pressure.