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GBP/AUD Exchange Rate Facing Sell-Off as UK Lockdown Looms


GBP/AUD Exchange Rate Dented by UK Lockdown

The Pound Australian Dollar (GBP/AUD) exchange rate opens this week on the defensive as GBP investors are unnerved by the prospect on a new nationwide lockdown in the UK.

At the time of writing the GBP/AUD exchange rate is currently trading at around AU$1.8362, down roughly 0.3% from this morning’s opening rate.

Pound (GBP) Facing Bleak Week as UK Lockdown Stokes Growth Concerns

The Pound (GBP) looks to face a difficult week ahead as the prospect of a new national lockdown in England looks set to weigh heavily on Sterling sentiment.

Unsurprisingly GBP investors are concerns about how a four-week lockdown could damage the UK economy, with the country, with fears that the country could face a double-dip recession in the winter.

Analysts suggest that investors will also be concerned about the how the extension of the furlough scheme and other government support measures could impact public finances, particularly ahead of a potentially disruptive exit from the EU at the end of the year.  

Richard Hunter, Head of Markets at interactive investor, comments:

‘The lockdown announcement will also lead to calls for further government support to individuals and businesses which would pile further pressure on the UK’s financial position, while ongoing negotiations between the UK and the EU add further uncertainty to what is already a precarious outlook.’

However, it may not be all doom and gloom for the Pound this week, with reports of positive progress in Brexit trade talks potentially offering some support to the currency.

Dovish RBA to Dent the Australian Dollar (AUD)?

Meanwhile, the Australian Dollar (AUD) is in a holding position this morning as AUD investors are reluctant to make any aggressive bets on the ‘Aussie’ ahead of the Reserve Bank of Australia’s latest rate decision.

The conclusion of the RBA’s policy meeting on Tuesday is widely expected to see the bank slash interest rates from 0.25% to a new record low of 0.1%.

While this move has already been largely priced in by markets, there is the potential for a cautious outlook from policymakers to influence AUD exchange rates.

As a resurgence in coronavirus cases and new lockdown measures threat to derail the global recovery, it seems safe to assume the RBA’s forward guidance will be mostly dovish in tone.

Analysts suggest there will be a lot of pressure on the RBA to deliver further easing, as the bank seeks to combat stubbornly low inflation as well as significant slack in the labour market.

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