GBP/AUD Continues to Climb despite UK Vaccine Uncertainty
As the week draws on, increasing market uncertainty over global vaccination rollout has spooked markets and the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is climbing as a result. The Australian Dollar (AUD) has been hit harder by uncertainty than the Pound (GBP).
After opening this week at the interbank level of 1.77, GBP/AUD saw mixed movement for a few sessions before seeing a strong jump in demand.
Since the middle of the week, GBP/AUD has been surging higher as market sentiment shifts. At the time of writing, GBP/AUD trends near an interbank high of 1.79.
This is the best level for GBP/AUD in over a month and a half, since early December. It comes as the risk and trade-correlated Australian Dollar is hit by this week’s coronavirus vaccine woes.
Pound (GBP) Exchange Rate Gains Limited by UK Vaccination Jitters
The Pound has been gaining solidly against the Australian Dollar since earlier in the week. This is due largely to Australian Dollar losses, as well as resilient market optimism in Britain’s coronavirus situation.
Markets expect the UK will be ahead of other major economies in vaccination progress. This has also led to hopes of a quicker recovery for Britain’s economy.
However, many factors are still weighing on the Pound’s outlook. The British currency is falling against other major currencies as a result.
Markets are worried that an EU row with vaccine producer AstraZeneca could also hit the UK’s vaccine supply. On top of this, analysts are warning that Britain’s current coronavirus outlook is more dire than many investors realise.
According to You-Na Park-Heger, FX Strategist at Commerzbank:
‘We consider Sterling optimism to be excessive and we see the risk of disappointed expectations. We therefore urge caution about betting on further Sterling gains,’
Australian Dollar (AUD) Exchange Rates Tumble as Market’s Coronavirus Panic Rises
Despite resilience in global optimism at the beginning of the week, markets are becoming more risk-averse as the week goes on.
The relatively risky Australian Dollar has been unable to hold its ground this week, as market concern about the coronavirus pandemic worsens.
Coronavirus vaccine shortages in major economies and high infections across the world are pressuring markets to take more bearish stances.
Other factors, such as falling stock markets in the US and Asia, are also making investors more hesitant to take risks. Overall, risk-aversion is the cause behind AUD losses today.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Could Fall if UK Sentiment Worsens
The Pound to Australian Dollar keeps climbing, despite UK vaccination worries. While this is largely due to Australian Dollar losses, this also means GBP/AUD could fall again if market sentiment cools.
If markets become more optimistic about coronavirus vaccine rollout again, the risk and trade-correlated Australian Dollar could recover some of the losses seen in recent sessions.
On top of this, the Pound’s outlook isn’t particularly strong. Even with UK vaccine optimism, fears of a long UK lockdown persist as infection rates remain high.
If investors become more anxious about Britain’s coronavirus situation, the Pound is less likely to hold its recent highs.
Tomorrow will see the publication of Australia’s latest PPI and private sector credit stats. These stats are unlikely to be that influential, so the Pound to Australian Dollar (GBP/AUD) exchange rate focus will be coronavirus developments.