Pound to Australian Dollar Exchange Rate Recovery Runs Out of Steam
Updated 14:39 GMT 24/03/2020:
While both the Pound (GBP) has seen stronger demand today, the Australian Dollar (AUD) has held its ground. This is keeping the Pound to Australian Dollar (GBP/AUD) exchange rate from recovering too much.
The Federal Reserve’s stimulus has led to a US Dollar (USD) slump. This is boosting both GBP and AUD, but AUD has benefitted more strongly this week so far.
Due to Britain’s worsening coronavirus outlook as well as today’s gloomy UK data, Sterling has had little other reason to strengthen. As a result, the GBP/AUD recovery has run out of steam for now.
The Australian Dollar may continue to benefit from US Dollar (USD) weakness as fears of a US recession rise today.
(Originally published 11:04 GMT 24/03/2020)
Pound to Australian Dollar Exchange Rate Edges Away from Half-Month Worst
Risk-correlated assets like the Australian Dollar (AUD) finally found a breath of air yesterday, keeping pressure on the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate. The Pound (GBP) is unappealing as Britain finally enters full lockdown.
The Australian Dollar’s weakness was so broad last week that GBP/AUD was able to advance slightly. AUD’s deep lows have perhaps made it easier for the currency to rebound more strongly.
GBP/AUD opened this week at the interbank level of 2.01. The pair briefly held its ground before beginning to tumble yesterday.
The risk rebound is continuing today, keeping GBP/AUD lower. GBP/AUD has lost over three cents since yesterday and currently trends near a half-month worst level of 1.95.
The Federal Reserve’s latest stimulus measures have bolstered ‘Aussie’ demand. However, the Pound has been unable to benefit amid the worsening domestic coronavirus outlook.
Pound (GBP) Exchange Rates Damp as Britain Locks Down
Investors have had little reason to buy the Pound (GBP) so far this week. It has been tumbling even against the relatively riskier Australian Dollar (AUD).
Britain’s coronavirus pandemic situation has been rapidly worsening. Pound selling accelerated yesterday when the UK government announced it would put Britain under full lockdown.
Citizens were told to stay indoors and avoid gatherings unless absolutely vital, or for solo exercise once a day. The majority of businesses will be shut.
However, lockdowns have already been happening in other major regions. As a result this news was not a big shock to investors. Instead, investors were disappointed at the UK government’s staggered approach to action.
The impact of the virus on Britain’s economy has already begun to show in data. Markit’s March PMI projections for Britain were published today, painting a dire picture for the outlook.
Blimey. Britain’s services sector, the engine of the UK economy, contracted more than ever in March.
Purchasing Manager’s Index down from 53.2 points to 35.7. Anything below 50 points is a contraction.
Worst since the data series began in 1998 pic.twitter.com/tRcuTcOALm
— Ed Conway (@EdConwaySky) March 24, 2020
Australian Dollar (AUD) Exchange Rates Benefit from Brief Risk-Rally
The Australian Dollar (AUD) has been clawing back some losses in recent sessions. It follows weeks of dire performance.
Investors are more eager to buy the Australian Dollar from its cheapest levels. This movement was exacerbated yesterday, by market reaction to another emergency stimulus measure from the Federal Reserve.
The Fed introduced a huge government-backed debt buying scheme as part of quantitative easing (QE). The Fed has offered to buy unlimited amounts of assets.
The US Dollar (USD) has slipped and market sentiment has recovered slightly as a result.
This has helped this week’s modest recovery in currencies correlated to risk and trade. This includes the Australian Dollar (AUD).
Pound to Australian Dollar (GBP/AUD) Exchange Rate Could Rebound as Risk-Aversion Persists
The Australian Dollar’s (AUD) rebound from its cheapest levels is likely to be brief overall. GBP/AUD is already edging away from its half-month-lows today.
With the UK finally in lockdown, Pound (GBP) investors are looking ahead to potential upcoming fiscal stimulus measures from the UK government.
UK Chancellor Rishi Sunak is under pressure to offer more support for self-employed workers. More fiscal stimulus could help Sterling to recover from its worst levels.
As for the Australian Dollar, its appeal is likely to be limited. It remains a currency highly correlated to market risk and trade-sentiment, so it is likely to keep tumbling as the global coronavirus pandemic deepens.
Upcoming UK inflation and retail data due in the coming days is likely to be overshadowed. Overall, coronavirus developments and rival movement is likely to dominate the Pound to Australian Dollar (GBP/AUD) exchange rate.