GBP/AUD Exchange Rate Climbs in Risk-Off Trade
The Pound to Australian Dollar (GBP/AUD) exchange rate is on the front foot again this morning, as the ongoing coronavirus crisis sees investors steer clear of the risk-sensitive ‘Aussie’.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9913, up around 0.5% from this morning’s opening rate but well below yesterday’s high of AU$2.0037.
Australian Dollar (AUD) Dented by Ongoing Coronavirus Fears
The Australian Dollar (AUD) remains on the defensive this morning as markets remain pre-occupied by coronavirus headlines and fears over the potential impact on the global economy.
Oil prices collapsed over 30% yesterday as a slump in global demand due to the coronavirus saw Saudi Arabia launch a price war in order to capture market share.
Today’s Exchange Rate News: #Coronavirus Panic and Oil Rout Creates #Currency Market Chaos 💲 https://t.co/ZYUr4vMGNC pic.twitter.com/GiyVWUfmnQ
— TorFX (@TorFX) March 10, 2020
This sent markets into a meltdown at the start of the week, with a mass exodus from risk-sensitive assets resulting in AUD exchange rates falling over 2% at certain points.
However compared with the chaos seen on Monday, markets appear relatively placated so far today, helping to limit the downside in the ‘Aussie’.
This comes as US President Donald Trump helped to shore up markets by announcing plans to implement tax relief measures.
Trump told reporters at a press briefing:
‘We are to be meeting with House Republicans, [Senate majority leader] Mitch McConnell, and discussing a possible payroll tax cut or relief, substantial relief, very substantial relief.’
However the Australian Dollar has also faced some pressure at home after data published overnight revealed that domestic business confidence plummeted to a six-year low in February.
Brexit Concerns Cap Upside in the Pound (GBP)
Meanwhile, the Pound (GBP) is only finding limited support this morning amidst fresh Brexit uncertainty.
This comes in response to fresh calls for the UK to delay the deadline for the Brexit transition period, currently scheduled for December.
Former Chancellor Philip Hammond suggests that the threat posed by the coronavirus will force the UK and EU to divert their attention away from trade talks.
However, the government has so far resisted all calls for a delay, stoking fears the UK is on a collision course for a no-deal Brexit.
GBP/AUD Forecast: UK Budget in Focus
Looking ahead, the coronavirus may take a back seat in the mid-week as investors turn their attention to the UK’s long-awaited Budget.
Expectations that the UK’s next Budget could include plans for significant spending increases helped the Pound to Australian Dollar (GBP/AUD) exchange rate to rally through much February.
However, in light of recent events, Chancellor Rishi Sunak may have needed to scale back his spending plans as part of a ‘coronavirus Budget’ which could leave GBP investors disappointed.
In the meantime, AUD investors will be keeping a close eye on a scheduled speech from Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle later tonight.
After cutting rates last week in response to the coronavirus, traders will be eager to see if there may be appetite for additional easing at the RBA, with the Australian Dollar potentially falling if Debelle hints that further cuts may be warranted.