Gloomy Holiday Expectations Weigh on Pound Australian Dollar (GBP/AUD) Exchange Rate

Pound to Australian Dollar Exchange Rate Struggles to Advance amid Growth Concerns 

While the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trending with an upside bias this week, the pair’s gains are limited. A gloomy holiday period outlook for Britain is making it hard for Sterling (GBP) to capitalise on coronavirus vaccine hopes. 

Compared to last week’s huge losses of three cents, this week’s GBP/AUD movement has been more modest. 

GBP/AUD opened this week at the interbank level of 1.81. After touching on a low of 1.79, the worst level for the pair in a month and a half, GBP/AUD rebounded. 

Its gains have been limited due to resilience in the ‘Aussie’, but the pair is still trending modestly above the week’s opening levels at the time of writing. 

Pound (GBP) Exchange Rates Struggle as Britain’s Holiday Outlook Seems Bleak 

Earlier in the week, the Pound saw a surge in demand in response to news that Pfizer Inc was making major progress on its coronavirus vaccine trials. 

Hopes for a safe and effective coronavirus vaccine would be a huge boon for Britain’s economy. Britain’s economy is highly services-focused, so it has been hit particularly hard by the coronavirus pandemic. 

However, today’s UK growth rate data indicated that Britain was still in for at least a few more months of rough performance before any vaccine would be ready. 

While UK growth data showed an impressive rebound in economic activity in Q3, it was still not as high as forecasters predicted. This was because growth slowed notably in September. 

What’s more, analysts believe that Britain’s economy is likely to struggle during the key winter holiday period as it endures its second national lockdown. According to James Smith, Economist at ING: 

‘the decline will be amplified in November, where we estimate we’re likely to see a 6-7% slide in monthly GDP on the month-long English lockdown. This will also result in a negative figure for Q4 as a whole.’ 

Australian Dollar (AUD) Exchange Rate Weighed by Economic Growth Uncertainties 

The Australian Dollar has been one of the market’s most appealing risk and trade-correlated currencies. However, it has been unable to capitalise on this week’s coronavirus vaccine news. 

This is partially because other nations are expected to benefit more than Australia’s from a vaccine. However, it is also due to concerns about Australia’s tourism industry, which is still being impacted by the pandemic. 

Australia is heavily reliant on tourism. However, travel remains highly restricted with many nations around the world still seeing coronavirus-related restrictions. 

According to Craig James, Economist at CommSec: 

‘Apart from times of war, there has never been a time like this, 

Economists are hoping for economic growth of 3%-5% over the next year or two. But getting the ‘V-shaped’ recovery is dependent on finding a safe way to open foreign borders and enticing more people to call Australia home.’ 

Pound to Australian Dollar (GBP/AUD) Exchange Rate Could Sustain More Gains on Brexit News 

As concerns over winter holiday economic performance persists, the Pound to Australian Dollar exchange rate remains under pressure going forward. 

However, the Pound could see a stronger rise in demand and more sustained advances in the coming weeks. 

It is expected that the UK and EU will reach some kind of Brexit deal before the end of the month. Speculation is rising that a deal will be presented next week. 

If there is a Brexit process, this could offset one of the biggest long-term downside factors for the Pound. However, talks could still collapse. If this happens, the Pound could tumble as it loses much of its recent appeal. 

The Australian Dollar, meanwhile, is likely to keep being influenced by shifts in global risk sentiment and coronavirus news. Higher hopes for a coronavirus vaccine sooner could boost AUD. 

Central bank news will of course be watched as well. Comments from Bank of England (BoE) and Reserve Bank of Australia (RBA) officials in the coming sessions could influence the direction of the Pound to Australian Dollar exchange rate as well. 

Josh Jeffery

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