The GBP/AUD exchange rate has dipped today after hitting an eight-month high on Friday, with fresh coronavirus worries weighing on the Pound.
Meanwhile, the Australian Dollar is subdued despite a risk-on market mood after the Reserve Bank of Australia (RBA) maintained its dovish stance at its latest interest rate decision. In addition, with Victoria’s one-week lockdown likely to be extended, pressure could mount on the ‘Aussie’.
Last Week: GBP/AUD Exchange Rate Soars on BoE Comments
The Pound slipped against the Australian Dollar at the beginning of last week, with Sterling dragged down by Brexit anxiety and an increase in coronavirus cases.
However, GBP later rallied as the UK government extended its vaccination programme to 30-year-olds. Hawkish comments from Bank of England policymaker Gertjan Vlieghe further boosted the Pound, pushing GBP/AUD to an eight-month high.
The Australian Dollar, on the other hand, started the week strongly amid a bullish market mood and rising commodities prices.
AUD then plummeted following an outbreak of a ‘highly infectious’ coronavirus variant in Victoria – Australia’s second most populous state – leading to a one-week regional lockdown.
Three Things to Watch for This Week
1. Coronavirus Developments
Many UK scientists are calling for a delay in ending restrictions in England amid concerns of a third wave, while cases in Australia are rising despite a regional lockdown in Victoria. In both countries, the spread of the coronavirus and the governments’ responses will likely have a large impact on their respective currencies.
2. Australian GDP Growth Figures
On Wednesday, Australia’s GDP figures for the first quarter of 2021 could provide a lift for the ‘Aussie’. While GDP growth is expected to have slowed, forecasts predict that the economy is still expanding.
3. UK Services PMI
The Pound could also strengthen if the final services PMI is revised higher than the previous estimate, especially if more of the UK economy reopening and the warm bank holiday weekend boosted consumer spending.
Looking ahead, high-impact data releases from Australia and the UK, and the uncertainty around coronavirus could cause volatility in the GBP/AUD exchange rate.