Pound Vs Australian Dollar (GBP/AUD) Currency Rate Forecast: Will Coronavirus Keep AUD Rates From Recovering? – Exchange Rates UK

The British Pound to Australian Dollar (GBP/AUD) exchange rate did spend most of last week trending lower, but as the Pound recovered it was able to easily gain some ground against the Australian Dollar. The trade and risk-correlated Australian Dollar’s overall appeal remains weak as the coronavirus outbreak develops and this could continue to limit its potential to gain against other major currencies like the Pound.

After opening last week at the level of 1.9700, GBP/AUD spent most of the week trending lower as the ‘Aussie’ briefly rebounded from its recent lows.

GBP/AUD touched on a low of 1.9300 in the middle of the week – a whopping four cents below its opening levels. This was the pair’s lowest level in a fortnight.

After that low though, GBP/AUD saw a rebound in demand. GBP/AUD recovered around half of the week’s losses and was trending in the region of 1.9565 on Friday.

The Australian Dollar’s continued weakness prevented it from sustaining bigger gains against the tumbling Pound over the past week.

After touching significant lows towards the end of February, the Australian Dollar experienced a rebound in demand towards the beginning of the week.

The ‘Aussie’ gained as major rivals like the US Dollar (USD) plunged on rising Federal Reserve interest rate cut bets. Hopes that central bank policy divergence would not damage AUD appeal helped the Australian Dollar benefit from the market’s rush into global rate cut bets.

However, ultimately the ‘Aussie’ remains a currency strongly correlated to market trade and risk-sentiment, as well as Chinese economic sentiment due to Australia and China’s strong trade ties.

As a result, the worsening global coronavirus outbreak remains a significant pressure on the Australian Dollar outlook and the currency’s appeal.

This meant it was easier for a recovering Pound to gain against the ‘Aussie’ towards the end of the week.

The Pound was throttled by a surge in Bank of England (BoE) interest rate cut bets at the beginning of the week which deepened GBP/AUD losses.

However, as BoE rate cut bets moderated slightly towards the end of the week the Pound recovered from its weekly lows.

BoE officials have signalled that rate cuts are likely, but a lack of urgency in signalling made markets doubt that the bank would be making an emergency rate cut outside of scheduled policy meetings like the Federal Reserve did.

Pound Sterling Forecast: Britain’s Coronavirus Situation may Worsen

The number of cases of the coronavirus Covid-19 has been rising rather rapidly in Britain over the past week. As a result, further developments in the domestic coronavirus situation will remain a focus for Pound investors over the coming weeks.

If the situation worsens notably, concerns will rise over economic impact. The government could begin to implement measures to prevent spread, and Bank of England (BoE) interest rate cut bets may rise further.

The Pound’s impact from coronavirus and BoE jitters could soften slightly if Britain’s economic outlook is seen as resilient. As a result, Wednesday’s key UK data could be influential.

Britain’s January growth rate results, production and trade stats will be published on Wednesday. These are typically influential stats and they will be the only noteworthy UK data for the week.

Strong data will boost hopes for Britain’s economic resilience, but as the data is from January markets are likely to anticipate upcoming coronavirus-related slowdown.

Any surprise Brexit developments would be yet another factor for Pound investors to remain aware of next week.

Looking Ahead: Could Australian Confidence Data Soften Coronavirus Fears?

Not much notable Australian data will be published next week. This is likely to leave the trade and risk-correlated currency reacting to market sentiment over Covid-19 and how it may impact global activity and trade.

However, some Australian confidence stats due throughout the week has the potential to cause some movement if it surprises investors.

Monday will see the publication of Australian business confidence for February from NAB. It will be followed on Tuesday by Westpac’s Australian consumer confidence results.

Australian consumer inflation expectations data will follow on Thursday.

If the confidence data beats forecasts it could make investors more hopeful that Australian economic performance could be resilient despite the virus spread.

However, weaker confidence would only add to coronavirus jitters and make it easier for the Pound to Australian Dollar exchange rate to avoid losses next week.

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