gbp-aud-forex

The British pound is lower against the Australian dollar on Wednesday.

  • UK Q2 GDP declines by 20.4% in line with expectations
  • Britain enters 1st recession in 11 years (since financial crisis)
  • China will bring up TikTok WeChat issues in trade talks with US
  • Australian unemployment data released Thursday

GBP/AUD was down by 78 pips (-0.42%) to 1.8186 as of 4pm GMT. The Sterling-Aussie exchange rate is lower by -0.29% this week.

The currency pair reached a high above 1.83 on the day before dropping over 100 pips to below 1.82. Yesterday it fell -0.07%.

GBP: UK enters recession as GDP dives 20%

Britain officially entered a recession on Wednesday – the first since 2009 in the midst of the financial crisis. Sterling had a kneejerk reaction higher to the news because June GDP grew over 8% but eventually the weight of the worst quarterly economic contraction on record pulled it lower.

Chancellor Rishi Sunak commented that the data confirms the UK economy is in ‘hard times’ and that hundreds of thousands of people have lost their jobs and sadly more will in the coming months. The declines were concentrated in April and May, with output rising again by June as the economy reopened.

UK Q2 GDP figures were significantly worse than many parts of Europe but the timeline of the UK pandemic was later so it went into lockdown later and came out of it later. That meant from a statistics point of view, the economic decline was concentrated into Q2 rather than spread between Q1 and Q2.

AUD: China brings apps ban into trade talks

It is hard to draw conclusions from the data because 1 in 4 British workers were in the government furlough scheme- meaning they were forced to stay at home and not to produce. Many of those are returning to the workforce but once the furlough scheme ends in October, some proportion will become unemployed- meaning a push pull effect on the economy.

The Australian dollar continues to brush off the growing US – China tensions, with China saying it considers the actions against its mobile apps Tiktok and WeChat part of its trade negotiations with the US. Traders now have one eye on the November election result, and possibly smoother international relations between the two superpowers afterwards if Joe Biden were to win.