Pound to Australian Dollar Exchange Rate Sheds Last Week’s Gains on BoE Bets
A combination of a Pound (GBP) selloff and an Australian Dollar (AUD) recovery has left the Pound Sterling to Australian Dollar (GBP/AUD) plummeting significantly this morning. Investors are selling the Pound on fresh Bank of England (BoE) speculation.
Last week’s broad Australian Dollar weakness made it easier for GBP/AUD to advance. GBP/AUD gained from the interbank level of 1.95 to 1.97 throughout the week.
However, GBP/AUD has already seen heavily volatile movement since markets opened this morning. In response to the latest comments from the Bank of England, GBP/AUD is now plummeting over 1.0%.
At the time of writing GBP/AUD is trending close to a low in the region of 1.94. This is the lowest level for GBP/AUD in a week and a half. The pair has quickly erased recent gains even as coronavirus jitters impact the Australian Dollar outlook.
Pound (GBP) Exchange Rates Plummet on Bank of England (BoE) Interest Rate Cut Bets
Within the past week, hopes of a UK economic rebound have doused. These hopes have been replaced with uncertainties around the potential domestic impact of the coronavirus Covid-19.
As the number of cases outside China soars and even cases in Britain jumped over the weekend, markets are becoming more anxious about the reality of Covid-19’s global impact.
The Pound (GBP) in particular was hit hard once again by virus jitters this morning. It comes as the Bank of England (BoE) states that it will take ‘all necessary steps’ in order to protect the economy from its impact.
*BANK OF ENGLAND WILL TAKE ALL NEEDED STEPS TO PROTECT STABILITY
— Nour Eldeen Al-Hammoury (@NourHammoury) March 2, 2020
These comments led investors to quickly bet that the bank could cut UK interest rates as soon as this month. With BoE interest rate cut bets soaring, the Pound is plunging.
On top of coronavirus jitters, anxiety ahead of upcoming UK-EU Brexit negotiations is also weighing on Sterling.
Australian Dollar (AUD) Exchange Rate Rebounds despite Concerning Global Developments
The Australian Dollar (AUD) has been one of the currencies hit hardest by the coronavirus outbreak, due to its close correlation with trade-sentiment and Chinese economic sentiment.
As the virus sees more cases outside of China, concerns have shifted to the global stage. Markets are now anxious that Covid-19 will have a significant impact on global economic activity and trade.
This led to the Australian Dollar’s continued losses last week.
This morning however, AUD saw a strong rebound in demand against many currencies. This included the Pound (GBP), as well as major rivals like the US Dollar (USD).
This was despite continued concerns over Covid-19’s spread, as well as bets that the Reserve Bank of Australia (RBA) could cut Australian interest rates soon.
This morning’s Australian data may have boosted AUD support slightly. Australian manufacturing beat projections, and business inventories unexpectedly rose.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Awaits Reserve Bank of Australia
The Pound to Australian Dollar (GBP/AUD) exchange rate is likely to remain volatile, even with the Reserve Bank of Australia’s (RBA) March policy decision right around the corner.
RBA interest rate cut bets have been rising, but investors are predicting that the bank will leave rates frozen in tomorrow’s decision.
Instead, investors are highly eager to see what tone the bank will take on the coronavirus. If the bank expresses that it could take action to prevent damage from Covid-19, RBA rate cut bets could solidify and the Australian Dollar (AUD) could plummet.
Covid-19 developments are likely to remain a big focus for GBP/AUD in the coming sessions, as the number of cases in Britain grows.
However, upcoming data and Brexit news could cause some movement as well.
Wednesday’s key data includes Australian growth and UK services stats. Any news around UK-EU Brexit negotiations could also influence the Pound to Australian Dollar (GBP/AUD0 exchange rate.