Pound to Australian Dollar Exchange Rate Steadies after Over a Day of Steep Losses
Updated 16:53 BST 07/04/2020:
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate’s downward tumble has slowed for now. After over a day of losses, GBP/AUD is now steadying slightly.
GBP/AUD has rebounded just a little, trending just above its worst levels in a week and a half. The pair has already lost all of last week’s gains though, a whopping five cents below the week’s opening levels.
Amid signs that UK Prime Minister Boris Johnson is stabilising after a day in intensive care, the Pound’s (GBP) losses have calmed. The Australian Dollar (AUD), on the other hand, is holding most of its gains.
Higher market risk-on movement is helping AUD to hold its ground. However, speculation that the Reserve Bank of Australia (RBA) may have sounded more hawkish than intended is preventing further AUD gains.
(Originally published 11:02 07/04/2020)
Pound to Australian Dollar Exchange Rate Falling as RBA News Boosts AUD Higher
A combination of a weaker Pound (GBP) and a surging Australian Dollar (AUD) has left the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate plummeting this week. The ‘Aussie’ is capitalising on market risk-on mood thanks to the latest Reserve Bank of Australia (RBA) news.
Despite a fairly impressive GBP/AUD climb of over two cents last week, the pair has already shed that.
After opening yesterday at the interbank level of 2.04, GBP/AUD began to tumble. GBP/AUD has already fallen below the key level of 2.00. The pair is trending in the interbank region of 1.99 at the time of writing.
The Pound is struggling to hold its ground against the Australian Dollar. Investors are hesitant to buy the British currency amid news that UK Prime Minister Boris Johnson had been taken into intensive care.
Pound (GBP) Exchange Rates Struggle as Boris Johnson’s Coronavirus Condition Worsens
At the beginning of the week, the Pound (GBP) was slightly spooked by news that UK Prime Minister Boris Johnson had been hospitalised for coronavirus symptoms.
Already known to have contracted Covid-19, Mr Johnson’s illness caused a minor surge of fresh market uncertainty.
Since last night that uncertainty has only intensified. Mr Johnson was taken into intensive care after the symptoms worsened.
Market panic has deepened as a result, which has had a negative impact on Sterling. However, the Pound’s movement remains limited due to a broad number of uncertainties making investors hesitant to move too much on the British currency.
According to Analysts at ING:
‘GBP’s neutral speculative positions leave some space for markets to rebuild some shorts on the currency, as the UK has yet to see the peak of the Covid-19 contagion.’
Australian Dollar (AUD) Exchange Rates Surging on Reserve Bank of Australia (RBA) Stance
The Reserve Bank of Australia (RBA) held its April policy decision today. After a March filled with emergency easing movement, the RBA took no fresh action on monetary policy today.
The bank left policy frozen as expected, but markets were surprised by the bank’s outlook.
The bank expressed optimism in how global policy was helping with the coronavirus pandemic. This prompted the bank to signal that the scale of its support could lessen if necessary.
Signs that the bank was already considering softening its stances led the Australian Dollar to soar. However, some analysts believed the movement was premature and that it would likely be quite some time before the bank pulled back on easing.
ING Analysts said:
‘Markets may be over-emphasising tapering prospects, in our view, as the RBA statement also highlighted: (a) an expected big economic impact and sharp rise in unemployment, and (b) that the yield-curve control commitment remains in place “until progress is made towards the goals for full employment and inflation” (which were already far away from the target before the Covid-19 crisis).’
Pound to Australian Dollar (GBP/AUD) Exchange Rate Could Recover if Boris Johnson Recovers
The Pound (GBP) has been under pressure amid concerns over Britain’s political outlook, but this weakness could be temporary.
Reports today are saying that UK Prime Minister Boris Johnson is ‘not on a ventilator’. Panic has calmed somewhat and there are hopes that Mr Johnson will return to work before too long.
In this scenario, the Pound would see stronger demand. It is likely to benefit from renewed stability as well as the market’s stronger demand for slightly riskier assets this week.
The Australian Dollar’s (AUD) resurgent strength, on the other hand, may be temporary. As some analysts noted, the Reserve Bank of Australia’s (RBA) optimistic signal may be too long term to give AUD investors much to be excited about just yet.
As a result the Pound to Australian Dollar (GBP/AUD) exchange rate will remain driven by coronavirus developments and risk-sentiment.