Pound to Australian Dollar (GBP/AUD) Exchange Rate Slips as Third Lockdown Imposed

The Pound to Australian dollar (GBP/AUD) exchange rate traded at 3-week lows below 1.76 this morning, due to concerns surrounding the new national lockdown.

At the time of writing, GBP/AUD lost almost two cents this morning but has since recovered some losses and is trading at $1.7635.

Pound (GBP) Tumbles amid Coronavrius Restrictions

The new strain of coronavirus has caused a surge in cases across the UK, prompting Prime Minister Boris Johnson to announce a new tougher lockdown for England which comes into effect on Wednesday.

The new restrictions, similar to those imposed in March 2020, are expected to hit the economy significantly with the lockdown expected to last until at least mid-February.

However, this morning key ally of the Prime Minister, Michael Gove said:

‘We can’t predict with certainty that we will be able to lift restrictions in the week commencing February 15-22.’

‘I think it is right to say that, as we enter March, we should be able to lift some of these restrictions, but not necessarily all.’

This comes as Chancellor Rishi Sunak unveiled a fresh £4.6 billion support package for businesses.

Sterling will likely find little support in news that the government will be offering more financial support, which could limit GDP growth in the first quarter of 2021.

 Australian Dollar (AUD) Exchange Rate Supported on Global Market Recovery

The Australian Dollar (AUD) was bolstered on Tuesday as global markets stabilised following an earlier sell-off and as investors were rewarded further evidence that economic recovery is underway.

China lifted its official yuan exchange rate by its highest margin since 2005, helping support demand for the Aussie.

Furthermore Aussie Dollar price action and recovery for risk assets comes ahead of a runoff election in the U.S. state of Georgia.

Control over Congress will be decided through votes for two Senate seats, with implications for the U.S. Dollar as well as risk currencies. Democrats would likely increase fiscal stimulus which would boost risk appetite and weigh on safe-haven demand for the US Dollar.

Pound (GBP) to Australian Dollar (AUD) Outlook: Coronavirus Remains Biggest Focus

The coronavirus pandemic will remain the biggest focus for markets in the coming days, and if Australia’s or the global coronavirus outlooks worsen, the risk and trade-correlated Australian Dollar could weaken.

Pound (GBP) investors will also be focused on the next six weeks of lockdown restrictions which could prove crucial to the UK’s economic recovery.

However, tomorrow’s UK services PMI could give investors a better idea on how the UK economy endured the coronavirus pandemic over the last month, figures are however expected to remain in contraction.

Aussie (AUD) investors will be looking to Thursday’s Australian trade balance data which could influence the Pound to Australian Dollar exchange rate further.

Georgina Clissold

Contact Georgina Clissold