- Pound (GBP) holding gains from the previous session amid optimism that a Brexit trade deal could still be achieved
- Chancellor Rishi Sunak to lay out his spending plans to guide the UK economy out of the coronavirus crisis
- Australian Dollar (AUD) under pressure on coronavirus anxieties and US – Chinese tensions
- Pound Australian Dollar (GBP/AUD) exchange rate has rallied back over 1.80.
After posting a 0.8% gain in the previous session, the Pound Australian Dollar exchange rate is extending those gains on Wednesday. At 08:15 UTC, GBP/AUD trades +0.05% at 1.8060.
The Pound surged versus all of its major peers in the previous session on renewed Brexit optimism. Hints from Chief EU negotiator Michel Barnier that the EU could be willing to compromise on EU fishing rights has boosted hopes that a post Brexit trade deal is still achievable. This has been a key sticking point in negotiations along with the so-called level playing field.
Investors will now turn their attention to the Chancellor, Rishi Sunak’s mini budget. The Chancellor will outline the government’s spending plans and relief package. Jobs are expected to be a key focus in addition to a stamp duty holiday to inject movement int the housing market. Speculation is also swirling that Rishi Sunak could extend the business rates holiday in some targeted sectors, such as leisure and hospitality, in addition to targeted VAT cuts. A strong Simmer Statement could lift the Pound higher.
The domestic picture in Australia weighed on the Aussie Dollar on Tuesday and continues to do so today. Ongoing anxiety over a second wave of coronavirus in Victoria which has seen Melbourne go back into lockdown for 6 weeks.
Fears are growing that renewed lockdown orders could put the brakes on economic activity and the economic recovery.
Reports that the White House is considering breaking the Hong Kong peg to the US Dollar as a punishment to China over the national security law is also weighing on the Aussie Dollar, which is not only a proxy for China, but also risk sensitive.
