GBP/AUD Exchange Rate Struggles to Recover despite Returning Coronavirus Concerns
The Australian Dollar (AUD) is being weighed by coronavirus jitters today, but the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is still giving back some gains. The past week’s movement has been driven largely by Brexit speculation.
After opening the week at the interbank level of 1.75, GBP/AUD spent the week trending higher. It rebounded slightly from last Friday’s 2-year low of 1.74
However, unlike other Pound pairings the Australian Dollar’s resilience limited GBP/AUD gains. GBP/AUD was only able to recover to around 1.77 as of the time of writing. This keeps it well lower than last week’s opening level of 1.81.
However, a combination of a Brexit deal and market risk-aversion could see the Pound to Australian Dollar exchange rate advancing more strongly – if a deal is actually secured.
Pound (GBP) Exchange Rates Struggling to Sustain Recovery amid No-Deal Brexit Fears
The Pound spent much of the past week rebounding from its worst levels. This was largely due to speculation that a Brexit deal was close.
Today however, Sterling is slipping as time is running out for the UK and EU to secure a deal. This is causing no-deal Brexit fears to rise.
Analysts are careful to note that there is still a notable possibility of a no-deal outcome if there is no deal reached or pushed through Parliament quickly enough to meet the end of the Brexit transition period this month.
Still, analysts also believe a deal is still very likely. According to Malcom Barr, Analyst at JPMorgan:
‘Our sense is that the likelihood of a deal has moved up from the 60-40 we had as the week began, and we now mark that up to 70-30.
In our view, solutions to all of the issues listed above which both sides would be able to live can be designed, even if the process of getting to them is difficult.’
Australian Dollar (AUD) Exchange Rates Appealing despite Coronavirus Surge
Following weeks of overperformance, the Australian Dollar’s appeal has been knocked slightly in recent sessions.
The ‘Aussie’ was surging on hopes for a recovery from the coronavirus pandemic. However, in recent sessions a cluster of infections has reportedly broken out in Sydney.
NSW Chief Health Officer Kerry Chant said:
‘My anxiety is we have not found the direct transmission route and we cannot be sure we have blocked the transmission line,’
There are concerns that Australia could impose fresh restrictions damaging economic activity if the surge does not come under control.
However, the Australian Dollar still avoided major losses against the Pound last week due to the overall higher market sentiment, which has yet to see a big shift away from risk.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Outlook Depends on Brexit
The Pound to Australian Dollar exchange rate has the potential to see a much stronger jump in demand next week, if a Brexit deal is secured.
Even if the UK and EU agree to a Brexit deal soon, it will still need to be passed into UK and EU law before the end of the month if a cliff-edge scenario is to be avoided.
As a result, developments around Brexit will remain the primary cause of GBP/AUD movement over the coming week.
Brexit developments are likely to overshadow next week’s UK growth and business investment stats.
However, the Australian Dollar could be influenced by next week’s Australian retail sales stats if they surprise investors.
More than that though, Australian Dollar investors will be closely watching for developments on Australia’s coronavirus situation, as infections rise again in Sydney.
The Pound to Australian Dollar exchange rate could of course plummet if a no-deal Brexit becomes more likely.