Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Edges Higher as Australia Braces for Second Wave
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate remained edged 0.3% higher, leaving the pairing trading at around AU$1.8008.
The risk-sensitive Australian Dollar remained under pressure on Monday as the country braces for a second wave of the coronavirus crisis.
Australia’s acting chief medical officer said the surge in cases in the country’s second-largest city may take weeks to calm despite fresh lockdown rules.
Authorities in the state of Victoria reported 275 new Covid-19 cases on Monday, down from an earlier record 438 cases.
Australia’s Acting Chief Medical Officer Paul Kelly said it would take ‘weeks’ to slow the most recent outbreak. Speaking to Australian Broadcasting Corporation radio, Kelly noted:
‘We have learned over time that the time between introducing a measure and seeing its effect is at least two weeks and sometimes longer than that.’
Meanwhile, upbeat reports about the EU leaders’ meeting boosted risk appetite. However this did little to boost AUD against the Pound.
EU leaders made progress in Brussels after three days of talks, although they remain divided on how best to carve up the €750 billion recovery fund.
Pound (GBP) Struggles as Brexit Optimism Fades
Sterling was left edged higher on Monday, but struggled to make significant gains against the ‘Aussie’.
The currency remained under pressure as hopes for the UK and European Union to secure a Brexit deal faded. The fifth round of talks is expected to begin today in London.
Sterling has been one of the worst performing G10 currencies lately. Despite Britain’s death toll being the highest in Europe, the country has been lifting coronavirus lockdown measures.
Last week, the Bank of England’s (BoE) governor, Andrew Bailey said the economy was beginning to recover. Although, with nearly half of Britain’s largest companies believing it will take until the second half of 2021 to recover, GBP remained under pressure.
Commenting on this, MUFG’s currency analyst, Lee Hardman noted:
‘Incoherent government policy on COVID, the 2nd worst COVID death rate by population in the world, high frequency data that indicates a more subdued recovery, a budget deficit profile that is worse than most other major economies and rising Brexit uncertainties all point to the Pound being singled out as higher risk than most other G10 currencies.’
Meanwhile, tensions between the UK and China increased. Newspapers reported that London would suspend its extradition treaty with Hong Kong. The Chinese ambassador responded, noting China would retaliate to any sanctions imposed.
Pound Australian Dollar Outlook: RBA and Brexit Talks in Focus
The Pound (GBP) will continue to struggle against the Australian Dollar (AUD) as the fifth round of UK-EU talks begin.
If hopes the UK and European Union will reach a post-Brexit trade deal continue to fade, it will weigh on Sterling. This will leave the pairing flat.
Looking ahead to Tuesday, the Australian Dollar could struggle to rebound against GBP following the release of the Reserve Bank of Australia’s (RBA) minutes and a speech from its governor.
If the RBA minutes reveal policymakers continue to remain cautious and Governor Philip Lowe’s tone is overly dovish, it will send the Pound Australian Dollar (GBP/AUD) exchange rate slightly higher.