GBP/AUD Exchange Rate Stable amidst Coronavirus Fears
The Pound to Australian Dollar (GBP/AUD) exchange rate is trading robust this morning as market sentiment is dominated by coronavirus headlines.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9571, virtually unchanged from this morning’s opening rate and just shy of a two-week high.
Australian Dollar (AUD) Undermined by Coronavirus Fears
The Australian Dollar (AUD) opens this week’s session on the back foot, amid heightened concern about the coronavirus outbreak.
Markets are growing increasingly worried about the outbreak becoming a pandemic after a sharp increase in the number of reported cases around the world.
Fears are growing that the coronavirus outbreak could become a global pandemic as new cases are reported around the worldhttps://t.co/E3s35JHOhH
— BBC News (World) (@BBCWorld) February 24, 2020
While the overwhelming majority of cases are still found in China, with over 77,000 reported infections, there are now more than 1,200 cases spread throughout the world, with South Korea, Italy and Iran all reporting a sharp rise in infections over the weekend.
Paul Hunter, professor of health protection at the University of East Anglia in the UK, is particularly worried about the spike in infections outside of China and warns:
‘The tipping point after which our ability to prevent a global pandemic seems a lot closer after the past 24 hours.’
As panic over the outbreak grows, and markets become increasingly concerned about the economic impact of the coronavirus, it’s unsurprising to see investors shunning riskier assets such as the Australian Dollar.
Brexit Uncertainty Keeps a Lid on the Pound (GBP)
At the same time, the Pound (GBP) is struggling to take advantage of the Australian Dollar’s (AUD) weakness this morning as lingering Brexit uncertainty caps any upside in Sterling.
GBP investors remain concerned by the possibility of the UK crashing out of the EU in a no-deal Brexit at the end of 2020, amidst fears the two sides will be unable to agree upon a new trade deal.
Official trade negotiations are set to begin next month, but already the two sides have set out conflicting goals for the talks.
Boris Johnson has stated that he is seeking a free-trade deal with the EU, but that the UK will not be bullied into accepting EU regulations.
Meanwhile the EU has repeated stated that any free-trade agreement must be based on EU rules as it attempts to ensure the UK maintains a ‘level playing field’.
GBP investors fear that these two opposing aims will result in talks quickly reaching an impasse, and likely leading the UK towards a no-deal Brexit as Johnson has threatened to walk away from talks if he is unable to secure his desired deal.
GBP/AUD Forecast: Coronavirus and Brexit to Remain Key Catalysts this Week
Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate is likely to remain highly sensitive to any developments surrounded the coronavirus and Brexit, amidst in lull in impactful domestic data.
In terms of the coronavirus we expect to see AUD exchange rates come under significant pressure over the week to come, especially if cases outside of China continue to spike.
Meanwhile, GBP investors will keep an eye out for any Brexit headlines as they brace for the start of trade negotiations next week.