GBP/AUD Exchange Rate Strengthens amid Risk-Off Trade
The Pound Australian Dollar (GBP/AUD) exchange rate is back on the front foot this morning as the pairing extends its recent recovery in light of the deteriorating market mood.
At the time of writing the GBP/AUD exchange rate is currently trading at around AU$1.7817, up 0.3% from this morning’s opening rate.
Australian Dollar (AUD) Faces Pressure as Risk-Off is Back in Vogue
The Australian Dollar (AUD) has exploded higher in recent weeks on the back of improving market sentiment, but it increasingly looks as though the good times may be over for the ‘Aussie’.
This comes as the global economic recovery looks to be under threat as we face a much feared second wave of coronavirus infections, with cases spiking again in Europe, UK and many other parts of the world.
Many countries have already started to impose new restrictions in order to curb the spread of the virus, some of which will inevitably damage their economic prospects.
AUD investors have also been unnerved by the threat of renewed tensions between the US and China after the two clashed over the coronavirus pandemic at the UN General Assembly.
US President Donald Trump used his speech to call for China to be held ‘accountable’ for the pandemic, while his Chinese counterpart Xi Jinping fired back by suggesting that ‘no country has the right to dominate global affairs’.
Pound (GBP) Upside Capped as UK Faces ‘Challenging’ Six Months
At the same time, the Pound (GBP) may find its advance against the weakened Australian Dollar (AUD) tempered somewhat by concerns over the UK’s governments new coronavirus restrictions.
Boris Johnson announced on Tuesday that pubs, restaurants and other hospitality venues will be required to close from 10pm, that office workers should work from home and that plans to reopen sporting events for spectators would be halted.
Johnson warned that the restrictions are likely to remain in place for up to six months, and that the nation risks a second lockdown if these rules are not followed.
The move has spooked GBP investors as it stokes fears the UK’s deep recession in the first half of 2020 could stretch into next spring as coronavirus cases continue to surge at an alarming rate.
Robert Wood, Chief UK Economist at the Bank of America, said:
‘We struggle to see how the economy can grow in the fourth quarter with escalating lockdown measures, fading stimulus and Brexit risks.’