GBP/AUD edges higher following budget
Despite a sharp overnight dip during the beginning of the trading week, the British pound to Australian dollar (GBP/AUD) exchange rate appears to be on the rise.
At the time of writing the British pound to Australian dollar (GBP/AUD) currency pairing stands at AUD 1.80, a rise from AUD 1.79 seen a week ago.
The British pound’s (GBP) progress follows UK Chancellor, Rishi Sunak’s, budget announcement, which took place last Wednesday. Whilst the Chancellor stated that the coronavirus pandemic would continue to impact the UK economy in the long term, he also highlighted that the economy was forecast to grow by 7% in 2022.
The comments provided support for Sterling, following significant fluctuation in the British pound to Australian dollar (GBP/AUD) exchange rate during the past week. Whilst the British pound (GBP) may currently have the upper hand, the Australian dollar (AUD) has benefitted from strong trade data released last week.
Australia experienced record trade surplus in January
The Australian dollar (AUD) has been underpinned by new data which reveals that the country experienced a record trade surplus in January. Figures show that the balance of goods and services in Australia reached AUD 10.1 billion, which is AUD 3 billion more than December. The amount far exceeded economists’ expectations, with a surplus forecast at AUD 6 billion last month.
A breakdown of the figures shows that exports surged by 6%, with a decline in imports by 2%. Retail spending rose by 0.5% in January, which was just slightly below forecasts of 0.6%. That being said, annual retail sales had increased by 10.6%, mainly driven by household spending.
Households appear to have a greater level of confidence in the Australian economy following an extremely minimal number of new coronavirus infections, as well as the rollout of vaccines.
Outlook for the Australian dollar (AUD), could fade later this month as the JobKeeper support programme comes to an end on 28th March. It appears that the number of Australians receiving JobKeeper support has been on the decline ahead of the wind up of the scheme. Between October and December, there were a total of 1.54 million Australian workers on the scheme.
UK Furlough scheme extends to September
Whilst it was anticipated that Rishi Sunak would announce an extension to the UK furlough scheme during the recent budget, the extension is longer than expected. Many claimed that the Chancellor would extend the scheme from April until June, to allow struggling businesses to get back on their feet following the gradual reopening of the UK economy in April.
However, the Chancellor declared last Wednesday that the furlough scheme would continue until the end of September. The scheme covers 80% of wages for hours not worked during the coronavirus pandemic. The scheme is said to have supported over 11 million UK workers, as it’s revealed that over 700,000 people have lost their jobs due to coronavirus, a figure which likely would be significantly higher had financial support not been in place.
Financial support for self-employed workers will also extend to the end of September, with a fifth grant under the Self-Employment Income Support Scheme (SEISS) which will run from May – September.
Canadian dollar slips against US dollar
The Canadian dollar (CAD) broke above the USD 0.80 resistance level against the US dollar (USD) last week, but it appears the rally has since run out of steam. Currently the Canadian dollar to US dollar (CAD/USD) exchange rate stands at USD 0.79.
The news comes as Canada records its worst gross domestic product (GDP) contraction, shrinking by 5.4% in 2020, the biggest decline since records began in 1961. The drop was largely down to the first wave of coronavirus during March/April where thousands of businesses were forced to close and many unable to work.
The fourth quarter of 2020 proved to be more successful for Canada, growing by 9.7%, beating expectations of the 7.5% which was initially forecast. As the country looks to ramp up it’s vaccine deployment, the outlook for Canada’s economy is becoming increasingly more optimistic for later this year.
New Zealand dollar weakens following slow factory growth in China
The New Zealand dollar (NZD) has largely dominated its major currency competitors this year including the British pound (GBP) and US dollar (USD). However, following news of slow factory growth in China, the New Zealand dollar (NZD) has pulled back from its currency rivals. The New Zealand dollar (NZD) remains sensitive to economic activity in China, given that China is New Zealand’s largest trading partner.
At the time of writing the British pound to New Zealand dollar (GBP/NZD) exchange rate stands at NZD 1.94, whilst the US dollar to New Zealand dollar (USD/NZD) exchange rate stands at NZD 1.40.
Last year, New Zealand Prime Minister, Jacinda Ardern, declared the country coronavirus free as the economy fully opened. However, this year has seen a slight rise in cases within Auckland, leading to cautiousness amongst investors.