• Australian Dollar (AUD) declines as the state of Victoria sees a record rise in the number of covid cases
  • Australia to see deflation with prices expected to fall -2% quarter on quarter
  • Pound (GBP) trades mixed versus major peers amid Brexit concerns, the July deadline for an outline deal won’t be achieved
  • UK corporate results offer some support

The Pound Australian Dollar (GBP/AUD) exchange rate is recovering after a steep selloff overnight. The pair slipped to 1.7941 in the Asian session, before quickly rebounding. At 07:40 UTC, GBP/AUD trades +0.15% at 1.8047.

The Australian Dollar is under pressure as the state of Victoria reported yet another record number of coronavirus cases. Victoria state recorded 532 new daily coronavirus cases, which came following a warning that the lockdown in Melbourne will continue if infected people continue going to work.

Australia’s second largest city, Melbourne is now half-way through a 6-week lockdown in an attempt to stop a second wave of infections. Fears that growing covid numbers will hamper the fragile economic recovery.

Attention will now turn to inflation data. Analysts are expecting inflation to drop -2% quarter on quarter in the April – June period as Australia experiences record smashing deflation after the covid pandemic crushed demand for a wide range of products and services. Deflation is negative for a currency and a weak reading could see the Aussie Dollar fall further.

The Pound trades mixed versus its peers as Brexit concerns remain despite EU chief negotiator Michel Barnier saying behind closed doors that he believes that a post Brexit trade deal is still possible. However, the official lines is that talks remain in stalemate. British Brexit Secretary David Frost said that the governments aim of reach an outline deal by the end of July won’t be met.

Whilst there is no high impacting UK economic data, upbeat corporate earnings have been helping sentiment along. High Street favourite Greggs reported a recovery in sales to 72% of 2019 levels after store reopen.