The British pound is higher against the Australian dollar on Monday.
- Markets swayed by prospect of more US stimulus
- Hong Kong reports new daily record COVID cases
- RBA’s Kent calls lower AUD ‘still an important stimulatory channel’
- Australian state of Victoria reports record cases (532)
GBP/AUD was up by 23 pips (+0.13%) to 1.8022 as of 4pm GMT. Last week the pound-Aussie exchange rate gained +0.04%.
The currency pair slid below 1.80 but rebounded back above it as the round number acted as a mid-point to the price action. On Friday it gained +0.11%.
GBP: Pound losses stabilise
The pound eked out a second weekly gain over the Australian dollar last week in what can best be described as a stabilisation of pound weakness than any real pound-strength.
In a busy week for foreign exchange markets that includes a Federal reserve rate decision, a possible US stimulus bill and company earnings from the like of Apple, Brexit fears seemed to move to the sidelines.
In the UK, a weekend decision to add a 14-day quarantine requirement for UK travellers returning from Spain was a headwind for the pound. The new rules show an inconsistent response from the government and cause major issues for the UK tourism industry, where the number one overseas destination is Spain.
AUD: Kent jawbone the Aussie
The Australian dollar dipped versus the pound despite a generally ‘risk-on’ environment in markets which has been a bigger boost to the Australian currency in recent months than it has the British pound.
Christopher Kent hardly rocked the boat on current RBA policy but did subtlety mention the currency, which if it continues to strengthen at its current pace would be a downside risk to the export-focused Australian currency. Kent called ‘a lower AUD an important stimulatory channel’.
The Aussie correlation with risk sentiment means more upside could depend on the latest government stimulus efforts United States. Since the extra $600/week unemployment benefits run out this week, there’s a hope in markets the government could act quickly to find a stop-gap. Treasury Secretary Steve Mnuchin has talked about a 70% wage replacement that could be capped at $200/week.