GBP/AUD Exchange Rate Sinks in Risk-On Trade
The Pound to Australian Dollar (GBP/AUD) exchange rate is currently trading close to its worst levels in nearly a year, as the ‘Aussie’ is turbocharged by risk-on trade.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7780, down 0.3% from this morning’s opening rate.
Australian Dollar (AUD) Soars on Rising Market Optimism
The Australian Dollar (AUD) continues to cut a path higher today, as burgeoning market optimism fuels demand for the high-yield currency.
A notable risk-tone has emerged this week, with a deal on the EU’s coronavirus relief fund as well as reports of multiple promising coronavirus vaccine candidates helping to turbocharge market optimism and hopes of a swift global recovery.
This has also pushed the safe-haven US Dollar (USD) into freefall, which in turn has given AUD exchange rates even more room to run.
Jeffrey Halley, Senior Market Analyst at OANDA, comments:
‘The overnight session was notable for the renewed energy seen in the great US Dollar rotation trade.
‘The Dollar fell almost everywhere as the tailwinds from the EU pandemic package, and the inspiring news on the Covid-19 vaccine front turned into hurricane-force winds.’
Further buoying the ‘Aussie’ in early trade today was also the publication of Australia’s latest retail sales figures.
According to preliminary figures published by the Australian Bureau of Statistics (ABS), sales growth climbed 2.4% month-on-month in June, a strong result in light of the record 16.9% surge in sales seen in May.
The ABS also noted a strong pick-up in sales in cafes, restaurants and clothing retail, bolstering hopes that Australia’s economy could bounce back quite quickly as consumers appear keen to return to pre-lockdown activities.
Pound (GBP) Undermined by Brexit Uncertainty
At the same time, the Pound (GBP) is struggling to hold its ground against a surging Australian Dollar (AUD) this morning as lingering Brexit concerns drag on Sterling sentiment.
With the UK and EU still deadlocked on a number of key issues, in spite of a month of ‘intensified’ negotiations, reports suggest that Boris Johnson is close to abandoning trade talks.
The Daily Telegraph reports that ministers are already working on the assumption of a no-deal Brexit and that the government plans to trade on World Trade Organisation (WTO) terms from next year.
The threat of a no-deal Brexit has always unnerved GBP investors, but they are thought to be particularly worried about the potential economic impact in light of the challenges posed by the coronavirus crisis.