The GBP/AUD exchange rate traded in a wide range last week as fears of a second wave of coronavirus infections gripped markets.
What’s Been Happening: Pound Undermined by Second Wave Concerns
The Pound struggled through last week’s session. The currency faced some pressure out of the gate after the UK government’s announcement it would be reopening more of the economy was undermined by a warning from health experts that the UK must prepare for a coronavirus resurgence.
While Sterling made an effort to recover in the latter half of the week, this was quickly undermined by renewed Brexit uncertainty, following comments from German Chancellor Angela Merkel in which she warned the UK must ‘live with the consequences’ of a hard Brexit.
Trade in the Australian Dollar, meanwhile, was equally mixed last week.
This saw the risk-sensitive currency initially gain on relief the US-China trade deal remained intact, before fluctuating in the latter half of the week in response to concerns of a spike of new coronavirus cases in the US as well as the threat of a transatlantic trade war.
Three Things to Watch Out for This Week
1. Brexit Talks
Likely acting as the main catalyst of movement in the Pound this week will be Brexit. With the start of ‘intensified’ trade negotiations. Will a lack of progress result in Sterling weakening again this week?
2. Johnson’s Speech
Also in focus for GBP Investors will be a speech by Boris Johnson in Tuesday, in which the PM is expected to outline his plans for a post-lockdown economic recovery.
3. Coronavirus Developments
Investors will be keeping a close eye on coronavirus headlines this week, with a number of new spikes around the globe likely to fuel second wave fears and potentially limit any upside in the risk-sensitive ‘Aussie’.
Looking ahead, the GBP/AUD exchange rate will likely continue to be met by volatility this week as heightened coronavirus and Brexit concerns keep investors on their toes.