Pound to Australian Dollar Exchange Rate Slips but Still Far Higher Today
Update 16:45 BST 30/07/2020:
Despite a lack of solid domestic support for the Pound (GBP), the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate surged today.
At the time of writing, GBP/AUD was slipping back down from the day’s monthly best level of 1.83. The pair remains in the interbank region of 1.82.
The Pound spent the day benefitting from weakness in rival currencies. In particular, expectations that the UK coronavirus outlook was less dire than the US outlook helped Sterling to climb on US Dollar (USD) losses.
Analysts expect the Pound outlook will remain weak overall though.
According to Shreyas Gopal and Sanjay Raja at Deutsche Bank, Sterling is likely to come under pressure again going forward:
‘From a market perspective, this pick up in noise has the potential to unsettle the currency over the next few weeks,’
(Originally published 10:07 BST 30/07/2020)
Pound to Australian Dollar Exchange Rate at Half-Month-Best
Investors have continued to buy the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate this week. This is despite a more dovish Federal Reserve, which would typically bolster risk-sentiment and the risk-correlated Australian Dollar (AUD).
This week’s GBP/AUD movement seems even more bullish than last week’s so far. While last week saw mixed, volatile movement, GBP/AUD has been trending with a more solid upside bias this week.
Since opening this week at the interbank level of 1.80, GBP/AUD has been gradually climbing and has gained over a cent. At the time of writing on Thursday, GBP/AUD is trending near the interbank region of 1.81. This is the best GBP/AUD level in half a month.
While Sterling (GBP) lacks much in the way of fresh support, it is benefitting from rival weakness. In particular, the US Dollar’s (USD) weakness is a market focus today.
Pound (GBP) Exchange Rates Benefit from US Economic Concerns despite UK Gloom
The Pound (GBP) has been gaining for much of this week. However, Britain’s outlook has been largely unchanged and remains filled with uncertainties and pessimism.
Rather than finding any new domestic support, the Pound has been more supported by global market sentiment.
As the US coronavirus and economic outlooks worsen, investors are speculating that Britain’s outlook may be comparatively more resilient. As a result, the Pound is benefitting from this week’s US Dollar (USD) weakness.
Still, a lot of pressure remains on Sterling. Losses reported by Britain’s biggest highstreet bank are keeping markets concerned about Britain’s outlook.
Lloyds plunged to a major Q2 loss after putting aside £2.4bn for bad debts. Its CEO says supporting customers through the Covid-19 crisis will come at "a cost" https://t.co/bro1fUZWkA
— Kalyeena Makortoff (@kalyeena) July 30, 2020
Australian Dollar (AUD) Exchange Rates Fail to Benefit from Federal Reserve News
The Australian Dollar (AUD) is a currency often correlated to market sentiment around risk and trade. It has been one of the major currencies to benefit most from hopes of a coronavirus recovery over the past few months.
However, the Australian Dollar has been on a bearish streak this week. This is despite a dovish Federal Reserve stance, which would normally boost risk-sentiment.
The currency has been tumbling back from its best levels due to a combination of factors.
Globally, fears of a ‘second wave’ of coronavirus infections are worsening. US-China trade tensions have also been flaring again. These factors are making risk-correlated currencies less appealing.
On top of this, the Australian Dollar has been pressured by news of a rising coronavirus infection rate in Australia’s State of Victoria, which is in a fresh lockdown. It is keeping markets anxious that Australia’s lockdowns could be extended.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Gains May be Limited
The Pound (GBP) continues to advance on rival weakness today, but it may not be able to climb far.
Britain’s mixed handling of the coronavirus pandemic, as well as weakness in UK data and no-deal Brexit fears, leave GBP broadly unappealing overall.
In fact as investors await next week’s Bank of England (BoE) policy decision, concerns of a dovish BoE could knock the Pound lower again.
The BoE has yet to dismiss the possibility of negative interest rates. Speculation that the bank could still become more dovish has the potential to hit Sterling throughout next week.
On the other hand though, Australian Dollar (AUD) weakness could keep GBP/AUD up instead.
Key Australian data due next week includes the nation’s final July PMI stats. If these fall short they could hurt Australian economic rebound hopes.
Britain’s own final July PMIs will be published next week as well, and these may also influence the Pound to Australian Dollar (GBP/AUD) exchange rate.