Pound to Australian Dollar Exchange Rate Soars to Best Levels since 2016 Brexit Vote
The coronavirus outbreak continues to hit the risk and trade-correlated Australian Dollar (AUD) especially hard, and the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is surging. Despite concerns over the UK economy, the Pound (GBP) is gaining on rival weakness.
Last week’s broad Pound weakness left GBP/AUD trending lower for much of the week. The GBP/AUD interbank level touched a half-month-low of 1.93 in the middle of the week. The pair ultimately opened and closed the week in the interbank region of 1.96.
GBP/AUD rocketed the moment markets opened this week though. GBP/AUD briefly touched on a high of 2.02 this morning, the best level for the pair since the 2016 Brexit vote.
At the time of writing, GBP/AUD is trending a big closer to the interbank level of 1.98. Coronavirus fears are leading to broad Australian Dollar losses so this weakness could continue.
Pound (GBP) Exchange Rates Benefitting as Rivals Plummet on Coronavirus Panic
The Pound (GBP) is already one of the strongest major currencies this week. As soon as markets opened, plunging rival currencies left the Pound more appealing in comparison and this led to surges in the British currency.
While Bank of England (BoE) interest rate cut bets are high, Pound investors are hopeful that the BoE won’t cut rates as dovishly as other major central banks.
On top of this, markets are hopeful that lower UK rates and a potential fiscal stimulus plan from the UK government at this week’s upcoming budget could help Britain’s economy to rebound.
According to Marshall Gittler, Head of Investment Research at BDSWiss Group:
‘There’s a lot of optimism about the impact of this week’s UK budget, which appears likely to be coordinated with a round of interest rate cuts,
The rate cuts don’t necessarily have to be negative for sterling if the market believes that they’re likely to bring about faster-than-expected growth.’
Australian Dollar (AUD) Exchange Rates Plummet on Domestic Recession Fears
Analysts are speculating that Australia’s economy could soon fall into recession. This is due to a worsening combination of factors, as the coronavirus outbreak worsens global and domestic economic outlooks.
Australia is a nation heavily reliant on trade and market sentiment. As a result, the global panic caused by the coronavirus outbreak has left AUD unappealing.
Australia’s stock market lost a whopping 7.33% amid panic over how the virus could impact the global economy. Two schools in Sydney closed down as the number of domestic cases of the virus grew as well.
According to credit rating agency Moody’s:
‘Global recession risks have risen. The full extent of the economic costs will be unclear for some time. Fear of contagion will dampen consumer and business activity. The longer it takes for households and businesses to resume normal activity, the greater the economic impact,’
Pound to Australian Dollar (GBP/AUD) Exchange Rate Investors Closely Watching Covid-19
The Pound to Australian Dollar (GBP/AUD) exchange rate is struggling to hold the key level of 2.00. There is potential for the Australian Dollar (AUD) to see even deeper losses over the coming week.
Further developments in market sentiment over the coronavirus outbreak will remain the big focus for AUD investors.
If the virus sees worsening spread in Australia then Reserve Bank of Australia (RBA) interest rate cut bets will rise and the Australian Dollar will struggle to hold its ground.
Tomorrow’s Australian business confidence data and Wednesday’s consumer confidence figures could cause some movement as well.
As for the Pound (GBP), it will likely continue to benefit from weakness in rivals. Pound investors are also highly anticipating Wednesday’s session, when the UK government will hold its spring budget presentation.
If the government announces fresh fiscal stimulus, the Pound to Australian Dollar (GBP/AUD) exchange rate is more likely to sustain gains.