GBP/AUD Exchange Rate Buoyed in Risk-Off Trade
The Pound to Australian Dollar (GBP/AUD) exchange rate opened this week on solid footing as the coronavirus panic continues to grip market sentiment.
At the time of writing the GBP/AUD exchange rate is trading at around AU$2.0127, up roughly 0.7% from this morning’s opening levels.
Australian Dollar (AUD) Tumbles in Risk-Off Trade
The Australian Dollar (AUD) is struggling in early trade this week as skittish investors continue to shun the risk-sensitive ‘Aussie’ amidst the coronavirus crisis.
As the situation continues to deteriorate with no end in sight, economists are growing increasingly gloomy in their predictions for global growth.
The Organisation for Economic Co-operation and Development (OECD) suggests the economic shock from the coronavirus pandemic is already larger than that of the 2008 financial crisis.
Angel Gurría, OECD secretary general also suggests its ‘wishful thinking’ to assume that global growth will bounce back after the crisis, warning the repercussions are likely to be felt for years to come.
‘Even if you don’t get a worldwide recession, you’re going to get either no growth or negative growth in many of the economies of the world, including some of the larger ones, and therefore you’re going to get not only low growth this year, but also it’s going to take longer to pick up in the in the future.’
Given the increasingly dire outlook its unsurprising to see investors steer clear of the Australian Dollar.
Pound (GBP) Gains Capped by the Threat of Further Restrictions
At the same time, while the Pound (GBP) is rallying against the Australian Dollar (AUD) this morning it is struggling to replicate this in wider trade as the UK government looks set to impose further coronavirus restrictions.
On Friday Prime Minister Boris Johnson announced all pubs, restaurants and gyms would be closing as in an effort to limit gatherings and contain the spread of the coronavirus.
However, over the weekend crowds of people were seen to be ignoring the advice of the government to avoid other people as they flocked to parks and other open spaces around the UK.
The government is now thought to be considering imposing more stringent lockdown measures, in order to enforce social distancing
Govt considering next steps like closing non-essential retail or whether to start treating people flouting the stay at home advice as acting against the law – all being discussed – huge decisions, nothing final
— Laura Kuenssberg (@bbclaurak) March 23, 2020
Unsurprisingly GBP investors are unnerved by the threat of more restrictions, which will further disrupt economic activity in the UK.
Analysts at ANZ Research warn the ‘near-term risks to GBP lie to the downside’ as the UK government plays catch up with other countries in locking down its citizens.
GBP/AUD Exchange Rate Forecast: UK PMIs to Offer First Insight into Impact of the Coronavirus
Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate could take a knock tomorrow with the publication of the UK’s latest PMI figures.
With efforts to contain the spread of the coronavirus disrupting economic activity over the past few weeks, the preliminary PMI figures will undoubtedly show a contraction of the UK’s private sector in March.
However, the extent of the slowdown is so far unclear, with a larger-than-expected drop in growth likely to spook GBP investors.
Meanwhile, so long as markets remain gripped by coronavirus panic it’s safe to assume, investors will continue to look unkindly at the risk-sensitive ‘Aussie’.