Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Falls as Trades Shrug off £330 Billion Lifeline
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate edged lower this morning, leaving the pairing trading at around AU$2.0176.
Coronavirus fears dominated markets once again today as funding concerns weighed on Sterling sending the currency lower.
Investors focused on the economic fallout of the virus, and yesterday’s announcements from Prime Minister Boris Johnson and Chancellor Rishi Sunak were shrugged off by traders.
The UK is set to launch a £330 billion lifeline of loan guarantees and provide another £20 billion in tax cuts, grants, and other help for small businesses facing the ever-growing risk of collapse.
The Pound was sold off as there was increased concern about the availability of funding. It is likely this concern will remain for the foreseeable future. This caused traders to sell off Sterling in favour of the US Dollar (USD).
UBS Wealth Management strategists wrote in a note:
‘The main reason for Dollar demand is liquidity concerns as in volatile times, companies and investors need Dollars to settle transactions and as long as these concerns persist, we expect the Pound to remain on the back foot.’
AUD/GBP Rises despite ‘Aussie’ Hitting Fresh 17-Year Low Against USD
The Australian Dollar was able to edge higher against the Pound today. Although AUD suffered losses against other currencies such as the US Dollar.
Over the course of the month, markets have crumbled as investors liquidated nearly everything for cash. This drove up the value of the US Dollar, and left riskier currencies such as the ‘Aussie’ lower and against USD, AUD plummeted to a fresh 17-year low.
Only traditional safe-haven currencies were able to hold their ground, and according to Gunter Seeger, senior vice president in investment-grade fixed income at New York asset manager PineBridge Investments:
‘It all stems from a shortage of US Dollars.
‘People are very, very nervous. Everyone’s nervous about the virus, about oil prices, about their jobs, about everything.’
Meanwhile, recession fears mounted as the Australian government revealed its toughest measures yet to help slow the spread of Covid-19.
In addition to all people who enter the country to self-isolate for 14 days, Prime Minister Scott Morrison warned against overseas travel and banned gatherings of more than 100 people.
Pound Australian Dollar Outlook: Will Growing UK Funding Concerns Send GBP Lower?
Looking ahead, the Australian Dollar (AUD) could reverse today’s gains against the Pound (GBP) following the release of Aussie labour market statistics.
If February’s unemployment rate remains stuck at the current highs above 5%, it will weigh on ‘Aussie’ sentiment.
Meanwhile, the coronavirus pandemic will remain the main catalyst for market movement as the number of cases increases worldwide.
If investors continue to fret over the availability of British funding, it could dampen Sterling sentiment. This could offset disappointing Australian employment data and cause the Pound Australian Dollar (GBP/AUD) exchange rate to slump further.