GBP/AUD Exchange Rate Firms as Coronavirus Concerns Prompts Fresh Risk Aversion

GBP/AUD Exchange Rate Buoyed as Risk Appetite Weakens

The Pound to Australian Dollar (GBP/AUD) exchange rate is edging higher this morning as fading risk appetite weighs on the ‘Aussie’.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8245, up roughly half a cent from this morning’s opening rate.

Australian Dollar (AUD) Dented by Coronavirus Concerns

The Australian Dollar (AUD) finds itself on the defensive against the Pound (GBP) this morning in response to growing risk aversion.

Investors appear to have grown increasingly jittery through the second half of this week in light of spiking coronavirus cases in Australia the US and other parts of the world, with analysts fearing a resurgence of the virus could hamper a global recovery in the second half of 2020.

Adding to these concerns are doubts over a new US fiscal stimulus package, which remains in limbo amidst political wrangling between the Republicans and Democrats.

However, helping to temper the ‘Aussie’s losses in overnight trade was the publication of China’s latest PMI figures.

These revealed that economic activity in Australia’s largest trading partner continued to expand last month, bolstering hopes that demand for Australian exports will remain high.

Pound (GBP) Stables Despite New UK Quarantine Measures

At the same time, the Pound (GBP) is holding in a narrow range this morning following the news that millions of people in Northern England face new lockdown restrictions.

Following a spike of coronavirus infections in the north of the country, the government announced that people in Greater Manchester, east Lancashire and parts of West Yorkshire, will no longer be allowed to meet other households indoors.

Health Secretary Matt Hancock said the new measures were introduced in response to data gathered from contact tracing and highlighted that ‘most of the transmission is happening between households visiting each other, and people visiting relatives and friends’.

While a rise in coronavirus cases is unlikely to fill GBP investors with confidence, they so far appear to be taking the news in their stride, likely in part due to businesses being allowed to remain open.

GBP/AUD Exchange Rate Forecast: Will BoE Discuss Possibility of Negative Rates?

Looking ahead to next week’s session, the main catalyst of movement in the Pound to Australian Dollar (GBP/AUD) exchange rate looks to be the Bank of England’s (BoE) latest rate decision.

While no policy changes are expected from the BoE following next week’s meeting, the bank’s forward guidance may prompt some volatility in Sterling.

Expect to see the Pound come under some significant pressure should the forward guidance may any reference to the possibility of negative interest rates.

Meanwhile, the Reserve Bank of Australia (RBA) will conclude its own policy meeting at the start of next week.

In light of Australia’s recent slide into a state of deflation as well as the country’s recent struggles with a coronavirus resurgence, it’s likely the RBA will strike a dovish tone, potentially putting some pressure on the ‘Aussie’.

Matthew Andrews

Contact Matthew Andrews