Pound Vs Australian Dollar [GBP/AUD] Currency Rate Forecast: Can Australian Outlook Offset Coronavirus Panic? – Exchange Rates UK

Despite the broad weakness in the Pound last week, the British Pound to Australian Dollar (GBP/AUD) exchange rate ultimately gained last week. Concerns over the coronavirus became more global last week, causing widespread market panic about its potential impact on global activity and trade. While the Pound has started to be hit by coronavirus jitters, the China and trade-correlated Australian Dollar is still sensitive to the brunt of coronavirus fears.

Since opening last week at the level of 1.9560, GBP/AUD has been trending with an upside bias due to broad Australian Dollar weakness.

As fears over the coronavirus continue to worsen, the Australian Dollar continued to see significant selloffs at the end of the week. On Friday, GBP/AUD hit new multi-year highs and trended in the region of 1.9796. These were the best levels for GBP/AUD since the 2016 Brexit vote.

The Australian Dollar’s broad weakness was perhaps the biggest factor for Pound to Australian Dollar movement last week.

As a currency correlated to risk, and especially to market sentiment around China and trade, the Australian Dollar has also been something of a proxy for market sentiment over the coronavirus outbreak.

The virus, Covid-19, originally spread from China and has caused major lockdowns amid attempts to contain it.

Concerns that the virus will continue to damage economic activity have caused concern that the Reserve Bank of Australia (RBA) could be pressured into taking a more dovish tone on monetary policy.

Towards the end of the week, the number of cases in China continued to increase, worsening fears that the virus would be a global problem.

This caused a market stampede towards currencies that are often bought specifically as safe havens, including the Japanese Yen (JPY) and Swiss Franc (CHF).

As a result, the Australian Dollar was one of the week’s worst-performers. It even saw losses against Sterling, which has also been weak as hard Brexit fears return in full force.

The UK government threatened that it could walk away early from UK-EU Brexit negotiations if talks do not go well. This caused fears of a cliff-edge outcome to return.

On top of this, hopes for Britain’s economic activity to rebound are worsening as coronavirus fears rise and expectations for the upcoming budget to see a rise in government spending have faded.

Pound Sterling Forecast: UK PMIs May be Overshadowed by Brexit and Covid-19

Next week’s UK economic calendar will be a little busier, with February’s final UK PMIs from Markit due for publication.

However, as Britain’s PMI projections already came in higher than expected and the Pound is still performing poorly despite strong data, these stats may be overshadowed.

Unless they are considerably stronger than expected, Pound investors may keep their attentions focused on developments regarding Brexit and the coronavirus Covid-19.

Next week will see the UK and EU finally begin 2020’s Brexit negotiations. The talks are expected to last throughout the year and will decide whether Brexit ends with a deal or no deal at all.

Hard Brexit concerns are likely to keep pressure on Sterling, but the Pound could also see weakness on rising fears that the coronavirus will damage Britain’s economy.

Looking Ahead: RBA and Growth News Ahead but Virus Fears Persist

The Australian Dollar has already seen significant losses in reaction to fears over the spread of Covid-19 and the potential pandemic that could arise from it, but it may continue to weaken the ‘Aussie’ further.

As concerns over Covid-19’s potential impact on the global economy worsens, the market rush away from risk and trade-correlated currencies towards safer havens could deepen.

This may leave the Australian Dollar continuing to fall throughout the next week. However, next week’s Australian economic calendar is set to be very eventful.

The biggest events of the week will be Tuesday’s Reserve Bank of Australia (RBA) policy decision. If the bank takes a notably more dovish stance on Australia’s outlook due to the virus outbreak, AUD is even more likely to see deeper losses.

Australia’s Q4 growth rate report, due Wednesday, could also be highly influential if it surprises investors.

Overall, more volatility is likely to be ahead for the Pound to Australian Dollar exchange rate as both currencies could be hit by coronavirus jitters and growth concerns.