Pound Australian Dollar (GBP/AUD) Exchange Rate Slips on Renewed UK Lockdown Speculation

GBP/AUD Exchange Rate Undermined by Lockdown Fears

The Pound to Australian Dollar (GBP/AUD) exchange rate is ticking lower this morning, as GBP investors are unnerved by the prospect of a second lockdown in the UK.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8218, down roughly 0.4% from this morning’s opening rate.

Pound (GBP) Slips as Boris Johnson under Pressure to Impose Second Lockdown

The Pound (GBP) finds itself on the defensive against the Australian Dollar (AUD) this morning, amidst speculation that the UK may be forced into a second lockdown.

Boris Johnson is thought to be under renewed pressure to impose a new lockdown following an alarming jump in daily coronavirus deaths.

The daily toll has now risen to 367 and has rocketed past the 200-a-day toll much sooner than the government’s scientific advisers had expected, with predictions that the second wave will be more deadly than the first.

A government source is reported to have told the Telegraph:

‘It’s going to be worse this time, more deaths. That is the projection that has been put in front of the Prime Minister, and he is now being put under a lot of pressure to lock down again.’

GBP investors fear a second lockdown would be disastrous for the UK economy particularly as the government looks to be far less generous with is support a second time around.

Australian Dollar (AUD) Buoyed by Upbeat Inflation Figures

At the same time, the Australian Dollar (AUD) remains buoyed this morning after ticking higher in overnight trade following the publication of Australia’s consumer price index.

According to data published by the Australian Bureau of Statistics (ABS), domestic inflation rose 0.7% year-on-year in the third quarter, rebounding from -0.3% in Q2 and beating forecasts for a 0.6% rise.

Quarterly CPI also outperformed expectations, jumping from -1.9% to 1.6%.

This rebound in inflation was largely attributed to the conclusion of the government’s free-childcare programme as well as a recovery in fuel prices after the startling collapse of oil prices back in April.

While the rebound in inflation was welcomed by AUD investors, the upside in the ‘Aussie’ was capped as analysts warned that the rebound in inflation could prove short lived as the Q3 bump was underpinned by temporary factors.

Sarah Hunter, chief economist for BIS Oxford Economics, commented:

‘There is likely to be further volatility in prices, as the full impact of the pandemic and re-opening of the economy feeds through.

‘But stripping these out, it is clear that the underlying trend for inflation remains very subdued.’

On top of this inflation still remains well below the Reserve Bank of Australia’s (RBA) target range, and unlikely to dissuade the bank from an expected rate cut next week.

GBP/AUD Forecast: Brexit Updates to Move Sterling

Looking ahead, in the absence of any notable data, movement in the Pound to Australian Dollar (GBP/AUD) exchange rate looks set to be dominated by ongoing concerns.

Unsurprisingly in regards to Sterling, the focus will be on Brexit, with markets receiving a potential update on talks later today when the EU’s Chief Negotiator Michel Barnier leaves London after ‘intensive’ talks over the weekend.

This could see the Pound rocket higher should Barnier report positive progress is being made.

Meanwhile, the ‘Aussie’ is likely to find itself increasingly vulnerable to losses through the second half of the week amidst weakening risk sentiment and the prospect of a rate cut from the RBA next week.

Matthew Andrews

Contact Matthew Andrews