GBP/AUD Exchange Rate Surges in Risk-Off Trade
The Pound to Australian Dollar (GBP/AUD) exchange rate is accelerating this morning, as investors shun the risk-sensitive ‘Aussie’ as coronavirus panic continues to grips markets.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9751, up around 0.8% from this morning’s opening levels.
Australian Dollar (AUD) Plummets amidst Coronavirus Panic Selling
The Australian Dollar (AUD) is in freefall this morning against a backdrop of heighted market anxiety.
Jittery investors are jettisoning risk-sensitive assets such as the ‘Aussie’ this morning amidst growing fears that the coronavirus is well on its way to becoming a pandemic, something which could trigger a global recession.
Coronavirus latest updates: first case detected in sub-Saharan Africa as stock market dives again https://t.co/ILVq6Wj5xs
— Guardian news (@guardiannews) February 28, 2020
AUD investors also look to have been spooked by the rout in global stock markets, which are currently on track for their worse week since 2008.
Elevated concerns over the coronavirus are likely to continue to limit the appeal of the Australian Dollar going forward as investors flock to safe-haven assets.
Kyle Rodda, market analyst for IG Australia, comments:
‘Panic in global markets has escalated, still on fears that the coronavirus is rapidly evolving into a global pandemic.
Naturally, the demolition of risk-appetite has seen traders flee to safe-havens, many of which have traded at historically significant levels.’
Pound (GBP) Gains Tempered by No-Deal Brexit Fears
At the same time, while it is rapidly climbing against the Australian Dollar (AUD), the Pound (GBP) is still nursing its wounds in broader trade after Thursday’s Brexit driven sell-off.
This came as the UK government outlined its aims for upcoming trade negotiations with the EU.
Releasing the government’s mandate for talks, Chancellor of the Duchy of Lancaster, Michael Gove said that the UK’s aim was to a strike a ‘comprehensive free trade agreement’ with the EU by the end of the year.
However, Gove also warned that the UK government would be willing to walk away from talks in June if there is not a ‘broad outline’ for a deal by then.
Given the fundamental differences between the UK and EU’s negotiating aims. GBP investors fear it is unlikely much progress will have been made by June, stoking concerns the UK is on track for a no-deal Brexit at the end of 2020.
GBP/AUD Forecast: Brexit Trade Talks to Add to Volatility Next Week
Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate may be infused with fresh volatility as UK-EU trade negotiations finally get underway.
GBP investors aren’t holding out much hopes for the first round of talks, with Sterling sentiment likely to take a dive if the two sides lock horns.
Meanwhile, we can expect the coronavirus to continue to play havoc with AUD exchange rates next week, particularly if the Reserve Bank of Australia (RBA) hints at a possible rate cut in response as it concludes its latest policy meeting on Tuesday.