The Pound has continued its advance attempts since markets opened this week. Investors are hoping for a Brexit breakthrough this week, which is supporting Sterling. Meanwhile, the Australian Dollar remains unappealing due to coronavirus-caused risk-off movement, as well as Reserve Bank of Australia (RBA) interest rate cut bets.
Last Week: RBA Rate Cut Bets Lead to ‘Aussie’ Plummet
The Australian Dollar was one of the worst performers among major currencies last week. Investors sold the currency en masse as markets looked for safe havens and Reserve Bank of Australia (RBA) interest rate cut bets surged.
A second wave of coronavirus infections has hit global markets, leading to fears of prolonged economic weakness. This is hurting currencies correlated to risk and trade, like AUD.
RBA officials have signalled that looser monetary policy and quantitative easing (QE) is on the way. This only led to deeper ‘Aussie’ losses.
The Pound was able to more easily benefit from the Australian Dollar’s weakness, as the UK’s latest measures to tackle the coronavirus pandemic were not as strict as feared.
Three Things to Watch For This Week
- Brexit Negotiations
The final scheduled UK-EU Brexit negotiation session is set to begin this week. Many analysts believe that if there is ever to be a Brexit deal breakthrough, this is the week we’ll see it.
2. Coronavirus Developments
The Australian Dollar remains unappealing amid market aversion to risk-correlated currencies. If the global coronavirus situation improves at all, investors may be more willing to take risks again.
3. UK Growth Rate Report
Wednesday will see the publication of Britain’s final Q2 growth rate data. If the data beats forecasts, it could bolster hopes for Britain’s economic resilience to the coronavirus pandemic and boost the Pound.
GBP/AUD Outlook
Global political and coronavirus developments will once again take focus for the Pound to Australian Dollar exchange rate this week. As a potentially huge week for the Brexit process, Pound volatility is highly possible.