Despite higher demand for the Pound on coronavirus recovery hopes, the Pound Australian Dollar (GBP/AUD) exchange rate is floundering this morning. Following last week’s tumble the Australian Dollar remains broadly appealing, while the Pound is weighed by speculation that the UK government will not reopen the economy as quickly as hoped.
Markets are becoming hopeful that demand for commodities and products overall towards the end of the pandemic will boost inflation globally. This is making investors more eager to buy the risk and commodity-correlated Australian Dollar.
Last Week: Markets Begin to See Reflation
For most of last week, investors bought the Pound. The British currency gained on hopes that Britain’s economy would recover from the coronavirus pandemic before other major economies do.
However, the Australian Dollar experienced a surge in demand right before markets closed for the week.
Due to an energy crisis in Texas, USA, as well as expectations that an end to the pandemic would lead to higher demand and prices, investors piled into risk and commodity-correlated currencies like the Australian Dollar.
Three Things to Watch For This Week
- UK Job Market Report
Tomorrow will see the publication of Britain’s December job market report. It will show markets how the UK job market is weathering the coronavirus pandemic, and stronger than expected data could boost hopes for continued economic resilience.
- Australian Wage Price Data
Following last week’s mixed Australian job market report, Australian wage data from Q4 2020 is due on Wednesday. Strong data could make the Australian Dollar even more appealing.
- Coronavirus Developments
Reports are emerging suggesting Britain’s lockdown will be eased slower than previously hoped. More solid updates on restriction easing, as well as developments on Australia’s own situation, will continue to drive currency movement.
GBP/AUD Outlook
Developments around the coronavirus pandemic and its impacts on economic activity will remain a focus for the Pound to Australian Dollar exchange rate. The Australian Dollar will also be driven by the market’s reflation hopes.