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Bank of England and Coronavirus Dominate Pound to Australian Dollar Exchange Rate Outlook

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Pound to Australian Dollar Exchange Rate Hold Monthly Highs Following Yesterday’s Surge

Following last week’s impressive gains, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate continues to climb this week so far. While the Pound’s (GBP) rally ran out of steam last week, the Australian Dollar (AUD) continued to be dragged lower by global coronavirus concerns.

Last week saw GBP/AUD climb almost solidly, gaining from the level of 1.8934 to 1.9155 throughout the week. While GBP/AUD struggled to hold its best levels then, it has already hit new highs this week thanks to yesterday’s jump in demand.

Yesterday GBP/AUD touched on a monthly high of 1.9350, and the pair trends closer to the level of 1.9305 at the time of writing.

Market uncertainties about the tone the Bank of England (BoE) will take on Thursday, as well as about the spread of a coronavirus in China, are dominating the Pound to Australian Dollar exchange rate outlook.

Pound (GBP) Exchange Rates Slip as Brexit Jitters Rejoin BoE Uncertainties

Bank of England (BoE) policy speculation have been among the primary causes of the Pound’s movements in recent weeks.

These concerns remain a significant aspect in the Pound outlook, with markets remaining anxious that the BoE could still cut UK interest rates as soon as this week.

However, while BoE jitters continue to weigh on Sterling the Pound was also hit lower by returning Brexit uncertainties today.

Britain is set to formally leave the EU on Friday. Markets are becoming concerned once again over how transition period negotiations will go and what they could mean for the future relationship between the UK and EU.

According to Jeremy Stretch, Head of G10 Currency Strategy at CIBC:

‘It’s been a case that Brexit issues have been off the agenda for a while, but there are now some signs of friction between the two sides as negotiations are gearing up, and that might be a source of consternation’

Australian Dollar (AUD) Exchange Rates Remain Weak amid Coronavirus Jitters

The Australian Dollar may have fallen even lower if not for the Pound’s weakness on returning Brexit jitters today, as concerns about a spreading coronavirus continue to hit the ‘Aussie’.

Over the weekend, concerns about the spread of the coronavirus worsened, leaving to a market risk-off movement when markets opened yesterday.

Analysts are concerned about the virus’ negative impact on economic activity, which led markets to seek out safe havens. Currencies correlated to trade and risk like the Australian Dollar saw considerable losses yesterday.

According to Joseph Capurso, Forex Analyst at CBA:

‘What is bad for the Chinese economy is bad for the Australian economy, AUD has lost almost 3 US cents so far this month.

The obvious question is how far can it fall?

The answer largely depends on the spread of concerns about the virus.’

Pound to Australian Dollar (GBP/AUD) Exchange Rates Await Australian Inflation Results

The Australian Dollar’s movement has been dominated by global risk-sentiment in recent sessions, but Australia’s domestic outlook has actually been fairly decent.

As a result, if coronavirus concerns soften or cool at all, some strong Australian data could lead to a rebound in demand in the coming days.

Australia’s key Q4 2019 inflation results will be published tomorrow. If they beat forecasts, Reserve Bank of Australia (RBA) policy speculation could become more optimistic and this would support AUD.

Speaking of central banks though, Wednesday’s Federal Reserve news and of course Thursday’s Bank of England (BoE) policy decision could be highly influential for GBP/AUD.

January’s BoE decision has been among the biggest events in the Pound outlook for the past few weeks.

If the BoE becomes more dovish than expected or cuts UK interest rates, the Pound to Australian Dollar (GBP/AUD) exchange rate outlook would become more bearish.