Hopes for Britain’s ramped up coronavirus vaccine program is helping the Pound Australian Dollar (GBP/AUD) exchange rate to hold its ground this morning.
However, the Australian Dollar’s performance has been solid as well. Often seen as a proxy for Chinese economic sentiment, the risky trade-correlated ‘Aussie’ is being boosted by strong Chinese data this morning. Risk-off sentiment in markets is limiting demand however.
Last Week: UK Outlook Relief Helps GBP/AUD Recover
Britain’s coronavirus situation remains dire. However, at the beginning of last week investors expressed relief about the Bank of England (BoE) outlook, which helped Sterling to mount a solid recovery.
BoE Governor Andrew Bailey signalled that the bank was hesitant to introduce negative interest rates any time soon. This was a relief to markets which had been betting on negative interest rates being introduced soon.
A worsening global coronavirus situation saw markets taking a break from risk-correlated currencies like the ‘Aussie’. This caused AUD to slip from its highs more easily.
Three Things to Watch For This Week
- Britain’s Coronavirus Situation
Sterling is still sensitive to the direction of Britain’s coronavirus situation. If the infection rate softens and the vaccine program continues to ramp up, investors may be more willing to buy the Pound.
2. Australian Job Market Report
Australia’s key December job market report will be published on Thursday. Australia’s job market is a key indicator of the nation’s economic health, so any surprises could influence AUD movement.
3. Retail Sales Results
Both UK and Australian retail sales stats from December will be published on Friday. They will give markets a better idea of how these economies weathered the coronavirus pandemic during the key holiday season.
GBP/AUD Outlook
There is plenty of key data due later this week. However, the Pound Australian Dollar exchange rate’s biggest movements will continue to be driven by developing coronavirus situations and shifts in market sentiment.