Pound Australian Dollar (GBP/AUD) Exchange Rate Dips amidst Tentative Market Recovery

GBP/AUD Exchange Rate Subdued on Market Calm

The Pound to Australian Dollar (GBP/AUD) exchange rate is on the back foot this morning as a sense of calm appears to have descended on markets following yesterday’s chaotic scenes.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9949, down roughly 0.4% from today’s opening rate.

Australian Dollar (AUD) Bounces from Worst Levels

The Australian Dollar (AUD) is creeping higher this morning as part of a broader recovery in markets following Thursday’s bloodbath.

There were scenes of chaos on markets yesterday amidst heightened concerns over the coronavirus and growing fears it will prompt a global recession this year.

This resulted in stock markets plummeting, and saw investors shun risk-sensitive assets such as the Australian Dollar in favour of safe-haven assets such as gold and the US Dollar (USD).

However a sense of calm descended upon markets overnight after the Federal Reserve announced it would inject $1.5 trillion into the financial system to help combat the coronavirus.

This has paved the way for the ‘Aussie’ to mount a tentative recovery this morning, but with coronavirus panic continuing to dominate markets any lasting upside in the AUD exchange rates is likely to prove limited.

Pound (GBP) Muted as Brexit Talks Cancelled

The Pound (GBP) is trading in a narrow range this morning amidst renewed Brexit uncertainty.

This comes following the announcement that the coronavirus outbreak has forced the next round of UK-EU trade talks to be cancelled.

The cancelling of next week’s talks has unnerved some GBP investors as the UK government’s reluctance to extend the Brexit transition period, effectively reduces the amount of time the two sides have to resolve their differences and reach a deal.

On top of this GBP investors are also wary given reports the UK government will soon announce it is shutting all schools as it attempts to contain the spread of the coronavirus.

GBP/AUD Forecast: Coronavirus to Play Further Havoc with Markets?

Looking ahead to next week, it seems safe to assume movement in the Pound to Australian Dollar (GBP/AUD) exchange rate will continued to be dominated by coronavirus headlines.

This could see the Australian Dollar test new lows if we see a return of the chaos which rocked markets throughout this week.

Also in the spotlight will be the publication of the minutes from the Reserve Bank of Australia’s (RBA) latest policy meeting, with AUD investors eager to see whether policymakers may be considering further monetary easing in an effort to counteract the economic impact of the coronavirus.

In the UK, GBP investors will be keeping an eye on the government’s response to the coronavirus, expect the Pound to take a hit if the government starts enforcing mass closures in an attempt to stem the spread of the disease.

Other events likely to influence Sterling will be the publication of the UK’s latest jobs report, with GBP exchange rates potentially strengthening if the post-election bounce saw the unemployment rate fall in January as some economists suspect.

Matthew Andrews

Contact Matthew Andrews