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Third UK Coronavirus Lockdown Knocks Pound Australian Dollar Exchange Rate Outlook

Pound Australian Dollar Exchange Rate Tumbling despite Brexit Relief 

Despite relief over a UK-EU Brexit trade deal being implemented, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is shedding last week’s gains. Concerns about the coronavirus pandemic’s impact on Britain’s economy are clouding the Pound (GBP) outlook. 

Last week’s GBP/AUD movement was highly mixed. After opening the week at the level of 1.7620, GBP/AUD jumped but struggled to hold its best levels. Ultimately, GBP/AUD closed the week over a cent higher in the region of 1.7777. 

Since markets opened this week though, GBP/AUD has been trending lower again. At the time of writing, GBP/AUD is trending almost two cents lower in the region of 1.7580. 

The Australian Dollar (AUD) remains fairly resilient, despite rising coronavirus cases in Sydney. This is because the market outlook for recovery from the pandemic is still fairly optimistic overall. 

Pound (GBP) Exchange Rates Tumble as UK Enters New National Lockdown 

The UK government’s tiered restriction system and a lockdown in all but name seen in November were not enough to prevent a surge of coronavirus cases in Britain since late-December. 

A new more infectious strain has been part of this new surge. In response, UK Prime Minister Boris Johnson announced last night that England would enter a full lockdown until at least February. Scotland will also see a national lockdown. 

These new restrictions, the strictest since March 2020, are expected to hit economic activity considerably. This has hurt the Pound outlook, even as the currency sees relief that a no-deal Brexit has been avoided. 

Sterling will likely find a little support in news that the government will be offering more financial support amid this new lockdown. 

Australian Dollar (AUD) Exchange Rates Remain Appealing on Recovery Hopes 

Despite surges of coronavirus cases in the UK, as well as rising infections in the city of Sydney in Australia, the Australian Dollar remains fairly appealing. 

Investors continue to buy the risk and trade-correlated Australian Dollar on expectations that the global economy will recover from the pandemic over the course of 2021. 

According to Craig James, Economist at CommSec: 

‘There is still a degree of uncertainty as we enter the year, a degree of hope but a degree of uncertainty 

We think as we go into 2021 the prospects are very positive (and) the Aussie Dollar will be back in favour in a year which will be much more on growth, here in Australia and globally.’ 

Pound Australian Dollar (GBP/AUD) Exchange Rate Outlook Could Improve 

The Pound outlook took another hit from Britain’s third national coronavirus lockdown. However, this may be the end of shocks to the British currency for now. 

Unless Britain’s coronavirus situation worsens further, or UK data is less resilient than hoped, further downside movement in the Pound may be limited. 

The Pound outlook has seen relief as a no-deal Brexit has been avoided. If upcoming developments or data boost recovery hopes, the Pound outlook could improve and Sterling could climb. 

If Australia’s or the global coronavirus outlooks worsen, the risk and trade-correlated Australian Dollar could weaken instead. Positive vaccine news could have the opposite effect and boost Australian Dollar demand. 

The coronavirus pandemic will remain the biggest focus for markets. 

However, tomorrow’s UK services PMI could give markets a better idea of how the UK economy weathered the coronavirus pandemic over the last month, and Thursday’s Australian trade balance data could also influence the Pound Australian Dollar exchange rate.