GBP/AUD Exchange Rate Strengthens as Risk Appetite Slumps
The Pound to Australian Dollar (GBP/AUD) exchange rate is on the advance this morning, climbing to a new two-week high as markets remain focused on coronavirus developments.
At the time of writing the GBP/AUD exchange rate is trading at around AU$2.0371, having climbed 0.7% from the start of today’s session.
Australian Dollar (AUD) Struggles in Risk-Off Trade
The Australian Dollar (AUD) is on the defensive against the Pound (GBP) and majority of its other peers this morning, as markets go risk-off in light of ongoing coronavirus uncertainty.
Market sentiment took a hit overnight in the wake of a press conference from US President Donald Trump in which he said the US should expect a ‘very, very painful two weeks’ while the White House warned as many as 240,000 Americans could be lost to the outbreak.
Trump warns of 'painful two weeks' as officials predict up to 240,000 US coronavirus deaths https://t.co/HKi1aAwLPk
— Guardian news (@guardiannews) April 1, 2020
Alongside reports that France, Spain, Russia and the UK have all recorded their highest daily deaths, this has created a very somber mood in markets this morning, limiting the appetite for risk-sensitive currencies like the Australian Dollar.
Further limiting the appeal of the Australian Dollar this morning are the minutes from Reserve Bank of Australia’s (RBA) emergency rate decision.
These suggested that the RBA is likely to leave interest rates at its current lows for years to come, whilst also warning that there will be significant jobs losses in the months ahead as the coronavirus crisis takes its toll on Australia’s economy.
However, the RBA also noted that there is little appetite for deploying negative rates, despite the economic threat of the coronavirus, which has helped to temper the ‘Aussie’s losses.
Pound (GBP) Bolstered by Stronger-than-Expected Manufacturing PMI
At the same time, the Pound (GBP) is drifting higher this morning as markets respond to the UK’s final manufacturing PMI.
According to data published by IHS Markit, March’s final factory PMI came in at 47.8, slightly above the preliminary estimate of 47.
But while the headline reading may have beaten expectations the survey still made for some worrying reading, revealing UK factories are slashing jobs at their fastest pace since 2009 as many clients cancelled orders.
Further GBP/AUD Exchange Rate Forecast: UK Services PMI to be Revised Lower?
Looking ahead, we can expect coronavirus news flow to continue to act as the main catalyst of movement the Pound to Australian Dollar (GBP/AUD) exchange rate for the foreseeable future.
While coronavirus developments will no doubt be the focus for investor, some upcoming data releases may also shape the pairing.
For GBP this will centre around the publication of the UK’s services PMI at the end of the week as March’s final reading looks likely to be revised lower as it also takes into account the period following the introduction of the UK lockdown.
Meanwhile, the publication of Australia’s latest retail sales figures on Friday may provide some rare positive news for AUD investors, with economists forecasting that sales growth will have rebounded in February.