GBP/AUD Exchange Rate Strengthens as US Oil Prices Collapse
The Pound to Australian Dollar (GBP/AUD) exchange rate is ticking higher this morning as the collapse of US oil prices into negative territory sent shockwaves through markets.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9629, up roughly 0.3% from this morning’s opening rate.
Australian Dollar (AUD) Undermined as US Oil Falls Below Zero
The Australian Dollar (AUD) is on the back foot against the Pound (GBP) and the majority of its other peers this morning as a spectacular collapse in US oil prices has spooked markets and dented the appeal of the risk-sensitive ‘Aussie’.
This comes as WTI crude prices turned negative for the first time in history, with traders literally paying buyers to take their May delivery contracts off their hands amidst fears US oil storage facilities are close to max capacity.
This glut of oil comes as the coronavirus crisis has seen global demand plunge, with Saudi Arabia’s flooding of markets in a recent price war with Russia only exacerbating the issue.
Jai Malhi, global market strategist at J.P. Morgan Asset Management comments:
‘The destruction in oil demand due to COVID-19 has been unprecedented – even more so than the deep recession in 2009. The surge in oil production over the last month has only exacerbated the issue and created one of the greatest gluts in the oil market history.
‘The pressure on oil storage capacity has forced West Texas Intermediate (WTI) oil prices to be slashed in an attempt to relieve the level of producers’ inventories.’
Given the unprecedented situation investors are naturally favouring safe-haven assets like the US Dollar (USD) and shying away from perceived risk of the Australian Dollar today.
Pound (GBP) Steady as UK Employment Hold Up Better than Expected in March
At the same time, the Pound (GBP) is holding its ground this morning as the UK’s latest employment figures came in better than expected last month.
In the Office for National Statistic’s (ONS) preliminary figures for March showed that employment remained relatively robust despite the UK implementing its lockdown measures.
Howard Archer, chief economic adviser to the EY Item Club, said:
‘The labour market deteriorated markedly less than had been expected in March. The number of workers claiming benefits rose a modest 12,100.’
However most analysts agreed that March’s figures do not tell the whole story and GBP investors will be looking to next month’s figures for the true picture of what toll the coronavirus crisis has taken on the UK’s jobs market.
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