Pound to Australian Dollar Exchange Rate Advances as Risk-Aversion Persists
For much of the week so far, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has been tumbling. However, as the Australian Dollar (AUD) remains sensitive to risk and trade-sentiment, it is once again under pressure.
Since opening this week at the level of 1.9701, GBP/AUD has been trending lower. Yesterday, GBP/AUD even touched on a half-month low of 1.9300 – four cents below the week’s opening levels.
While GBP/AUD has rebounded slightly since then, its gains have been limited. GBP/AUD still trends over two cents lower, trending in the region of 1.9468 at the time of writing.
Concerns over the coronavirus outbreak and its potential impact on the global economy continue to dominate market sentiment. Investors are hesitant to buy currencies correlated with risk, trade, or China’s economy, so the ‘Aussie’ outlook is gloomy.
Pound (GBP) Exchange Rates Rebound as Bank of England (BoE) Speculation Cools
The Pound has seen significant losses over the past week. Hard Brexit fears have returned, and Bank of England (BoE) interest rate cut bets have soared.
Rising BoE interest rate cut bets have been due to the outbreak of coronavirus Covid-19. There are concerns that the pandemic spread of the virus will have a big negative impact on global economic activity and growth.
As Covid-19 sees more cases in Britain, speculation soared that the Bank of England could be pressured to cut UK interest rates over the coming months.
Speculation of an emergency rate cut from the BoE even briefly rose earlier in the week. This was due to the Federal Reserve suddenly cutting rates outside of a scheduled policy decision.
Bets of BoE rate cuts are still high, but for now, speculation of an emergency rate cut has softened. This has boosted the Pound outlook slightly and helped the British currency to rebound today.
Australian Dollar (AUD) Exchange Rates Remain Weak on Coronavirus Outlook
The Australian Dollar is a currency correlated to market risk-sentiment, as well as global trade, and Chinese economic sentiment.
As Covid-19 outbreak originated in China and has caused lockdown in some major regions, it has hit the Australian Dollar particularly hard.
AUD did see a rebound in demand in recent sessions amid surging central bank interest rate cut bets.
As Federal Reserve rate cut bets rose, perceived monetary policy divergence between the Fed and Reserve Bank of Australia (RBA) lessened. This helped the Australian Dollar to rebound strongly from recent lows this week.
However, central bank speculation is cooling slightly towards the end of the week. Covid-19 outbreak fears still dominate the global outlook as well.
As a result, the ‘Aussie’ outlook remains gloomy and there remains a lot of pressure on the currency.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Outlook Remains Dependant on Covid-19
While volatile, the Pound to Australian Dollar exchange rate remains highly sensitive to developments with the coronavirus outbreak.
If the outbreak worsens or has a notable effect on global economic activity, trade-correlated currencies like the Australian Dollar are likely to suffer. For now, the AUD outlook is likely to be dominated by Covid-19.
GBP/AUD could also be influenced by Brexit developments and Australian data in the coming sessions.
The current round of UK-EU Brexit negotiations are set to wrap up today. Any surprising developments here could have an impact on the Pound outlook.
As for Australian data, tomorrow’s Australian retail sales results could slightly douse Reserve Bank of Australia (RBA) interest rate cut bets. This could weigh on a Pound to Australian Dollar (GBP/AUD) exchange rate recovery if it impresses.