- Risk sensitive Australian Dollar (AUD) drops after Fed’s dire projections
- Australian inflation expectation lowered to 3.3%
- Pound (GBP) broadly under pressure amid Brexit concerns & amid growing pressure on PM
- At 08:15 UTC, Pound to Australian Dollar (GBP/AUD) is trading +0.45% at 1.8302
The Pound is advancing against the perceived riskier Australian Dollar, paring losses from the previous session. The Pound Australian Dollar exchange rate settled on Wednesday -0.4% at 1.8216.
At 08:15 UTC, GBP/AUD is trading +0.45% at 1.8302 amid a broad risk off climate in the wider financial markets.
The Federal Reserve’s gloomy outlook and is weighing on risk sentiment on Thursday, dragging the perceived riskier Aussie Dollar lower.
The Fed forecast a -6.5% contraction in the US economy this year with unemployment at 9.5%. The Fed’s dismal numbers have come as a reality check to investors. The Fed said that interest rats will stay at 0 until 2022, whilst confirming that it will continue to support the US economy through the coronavirus pandemic. However, investors have opted to focus on the gloomy outlook and the Fed’s expectation of a long rocky road to recovery, which is dragging on sentiment on Thursday.
Domestic data also worked against the Aussie Dollar. Domestic consumer inflation expectation for June unexpectedly edged lower to 3.3%, compared to 4.2% forecast by analysts and 3.4% in May.
Looking ahead, there is no more Australian economic data due for release today. However, US jobless claims in t he US session could impact risk sentiment and drive the risk sensitive Australian Dollar.
Whilst the Pound is advancing against the Australian Dollar, it is trading lower versus other major peers as criticism against UK Prime Minister Boris Johnson and Brexit deadlock drag on demand for sterling.
Professor Neil Ferguson epidemiologist and former Downing Street advisor said that if the lockdown had started 1 week earlier the UK would have reduced the final death toll by half. These damning words come after the OECD also predicted that the UK economy would be the hardest hit developed economy from the coronavirus crisis. Boris Johnson is coming under pressure all angles over his handling of the pandemic.
Fears of a no trade deal Brexit were also keeping pressure on the Pound. EU chief negotiator Michel Barnier gave some stark warnings to the UK. The comments highlighted the distance that remains between the EU and UK, elevating fears that a trade deal will not be reached.
