Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as Risk-Off Markets Weigh on ‘Aussie’

March 16, 2020 – Written by John Cameron

GBP/AUD Exchange Rate Edges Higher, Australian Economic Woes Continue

The Pound Australian Dollar (GBP/AUD) exchange rate edged higher today as the risk-sensitive ‘Aussie’ suffers on global recession fears. The pairing is currently trading around AU$ 2.00.

Sean Callow, the senior currency strategist at Westpac, commented:

‘The overall backdrop is profoundly bearish for the Aussie because of its sensitivity to global growth … The environment in terms of growth, demand for Australian exports, confidence, that all just points to the Aussie struggling. Any rallies will be fragile.’

The Australian Dollar (AUD) is also suffering from fears that the Australian economy could face a recession in the near-term. This is due to Australian banks suffering to bolster the economy amid growing fears of a global recession would severely compromise the nation’s sensitive economy.

However, the Reserve Bank of Australia’s (RBA) is expected to go ahead with quantitative easing to boost Australia’s economy.

Rodrigo Catril, an economist at NAB, was downbeat in his analysis, commenting:

‘However, with the next Board meeting still three weeks away on April 7 and the world and Australian economies continuing to rapidly deteriorate, there seems little point in waiting three weeks to deliver further support to the Australian economy on the interest rate front.’

Pound (GBP) Exchange Rate Rises as UK Takes Firmer Stance on Covid-19

The Pound (GBP) benefited against the single currency after the UK Government considered stricter measures to tackle to the domestic Covid-19 epidemic.

This follows comments from the Health Secretary Matt Hancock, who said that over-70s could be recommended to stay at home within the ‘coming weeks’.

Today also saw the release of the UK Rightmove House Price Index, which rose by 1% in March, while the year-on-year figure edged higher at 3.5%.

Miles Shipside, a director at Rightmove, was cautious in his analysis, however, saying:

‘However, the current fast pace of the housing market could now be temporarily affected by the spread of the Covid-19 coronavirus. We expect that housing market statistics, like other economic indicators, could be prone to volatility over the spring and summer.’

GBP/AUD Outlook: Could the ‘Aussie’ Sink on Global Recession Fears?

Australian Dollar (AUD) investors will be awaiting tomorrow’s RBA meeting minutes. Any signs of an imminent recession for the Australian economy would further weaken AUD.

Tomorrow will also see the release of Australia’s House Price Index for the fourth-quarter. As this is expected to rise by 3.9%, we could see the AUD claw back some of its losses.

Sterling traders will be looking ahead to tomorrow’s publication of January’s UK ILO Unemployment Rate report. Any signs of improvement would prove GBP-negative.

The GBP/AUD exchange rate will remain sensitive to coronavirus developments this week. If signs of a global recession continue to haunt markets, we could see the risk-sensitive ‘Aussie’ sink further.

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TAGS: Australian Dollar Forecasts Pound Australian Dollar Forecasts