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GBP/AUD: Aussie Rallies On Stimulus Extension

22nd July 2020

Australian Dollar (AUD) soars as PM extends business relief package until next
Pound (GBP) under pressure as Brexit deadlock remains
Fears are rising that the UK could call Brexit talks off to concentrate on no-deal preparations
Talks remain stalled over fishing waters, the role of the ECJ and the level playing field

The Pound Australian Dollar exchange rate (GBP/AUD) is tanking lower for a second straight session on Wednesday. The pair settled on Tuesday -1% at 1.7865. At 07:15 UTC, GBP/AUD trades -0.6% at 1.7744, at the low of the day and a level not seen since August last year.

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The Australian Dollar is surging higher thanks to an extension of Australia’s economic stimulus package, and strong retail sales, which is overshadowing signs of a second wave.

Australia will spend another AUS$16.8 billion extending its relief package for businesses hit by coronavirus into next year. The Prime Minister Scott Morrison said that the Australian government will continue paying large wage subsidies to businesses until the end of March 2021 in an attempt to keep employees in their jobs. The scheme had been due to end in September.

The extension comes as rapidly rising coronavirus infections are alarming government officials. The spike in coronavirus numbers has resulted in a new lockdown being imposed in Melbourne, Australia’s second largest city.

Australian retail sales climbed 2.4% in June; a solid month given that it comes following a 16.9% surge in May as the economy continued to reopen. Cafes, restaurants, clothing and footwear saw large increases in turnover. However, there are also signs of stockpiling as coronavirus numbers increase again.

The Pound is trending lower across the board as the British government gives up hope of a post Brexit trade deal being agreed by the end of this month, the government’s self-imposed deadline. Boris Johnson expects trade with the EU to switch to unfavourable World Trade Organisation terms after the transition period ends on 31^st December.

Negotiations remain stalled over fishing waters, the role of the European Court of Justice and the so-called level playing field. Fears are growing the Brexit talks could be called off.

There is no high impacting data due across Wednesday for the UK or Australia leaving the pair vulnerable to political headlines and sentiment.