Stricter Coronavirus Measures Buoys Pound Australian Dollar (GBP/AUD) Exchange Rate

March 24, 2020 – Written by John Cameron

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Edges Higher as UK Introduces Stricter Measures

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate edged higher this afternoon, leaving the pairing trading at around AU$ 1.9816.

The Pound received some support this morning as traders moved away from the safe-haven US Dollar after the Federal Reserve announced it would offer markets as much liquidity as possible.

This buoyed risk appetite, although this was not enough to send the ‘Aussie’ higher against the Pound, as investors were still wary of the economic impact of the virus.

Commenting on this, Kyosuke Suzuki, director of forex at Societe Generale noted:

‘The market is still nervous about possible moves to cash everything, including unwinding of existing derivative positions.’

Added to this, the UK introduced stricter measures which included the closure of all non-essential establishments and a ban on gatherings of two or more people.

Prime Minister Boris Johnson also noted that people should only leave the house when ‘absolutely necessary’ and the coronavirus pandemic was the ‘biggest threat this country has faced for decades’.

GBP/AUD Rises despite UK Recession Fears

Sterling was able to rise against the Australian Dollar despite disappointing UK PMI data. March’s flash PMI composite hit a record low of 37.1, which likely capped GBP gains today.

Markit revealed the economy had been dealt with a more severe blow than any other time on record.

Commenting on this, ISH Markit’s Chief Business Economist, Chris Williamson said:

‘The surveys highlight how the COVID-19 outbreak has already dealt the UK economy an initial blow even greater than that seen at the height of the global financial crisis. With additional measures to contain the spread of the virus set to further paralyse large parts of the economy in coming months, such as business closures and potential lockdowns, a recession of a scale we have not seen in modern history is looking increasingly likely.’

Meanwhile, PMI data from Australia showed the manufacturing sector remained close to stagnation, at 50.1.

Although, the country’s services PMI slipped into contraction, and the PMI composite plummeted from 49 to 40.7 in March, dampening ‘Aussie’ sentiment.

Pound Australian Dollar Outlook: Coronavirus to Dominate Market Headlines

Looking ahead to Wednesday, the Pound (GBP) could give up some of today’s gains against the Australian Dollar (AUD) following the release of UK economic data.

If February’s inflation rate disappoints, while the annual Retail Price Index does not rise as high as expected, it will dampen Sterling sentiment.

Meanwhile, the ‘Aussie’ is likely to suffer losses if risk appetite falls once again this week.

If traders get spooked by the spread of coronavirus once again, and flock back towards the safety of the US Dollar (USD), both the Pound and Australian Dollar will suffer losses. This could leave the Pound Australian Dollar (GBP/AUD) exchange rate flat.

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TAGS: Pound Australian Dollar Forecasts