March 12, 2020 - Written by John Cameron
STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as Covid-19 Fears Weigh on ‘Aussie’
GBP/AUD Exchange Rate Rises as Australian Economic Outlook Darkens
The Pound Australian Dollar (GBP/AUD) exchange rate rose by 0.8% today after Australian Prime Minister Scott Morrison announced a $17 billion coronavirus stimulus package to aid Australia’s struggling economy. This left the pairing trading around AU$1.995.
The Australian Dollar (AUD) fell after the announcement as many economists still believe that the Australian economy could fall into its first recession in 20 years.
CMC Markets’ Chief Strategist Michael McCarthy was downbeat about the health of the global economy, commenting:
‘We simply don't know how far this virus will spread and what the economic impacts will be… We're in danger here of heading towards a crash.’
‘Unless we see either a peak in infections or a comprehensive or coordinated response from governments around the world, it looks like pressure shares could continue.’
The Australian Dollar has suffered from a risk-off market mood today after the US declared that it was temporarily suspending flights from Europe to the US. This left markets jittery on the prospect of a global economic slowdown.
ANZ Research Economists Zhaopeng Xing and Raymond Yeung comments:
‘In addition, the virus outbreak has now spread to China’s key trading partners, including South Korea, Japan, Europe, and increasingly the US. Global demand will become increasingly uncertain. China will need to brace itself for the challenging growth outlook.’
GBP/AUD Exchange Rate Rises in spite of Emergency UK Cobra Meeting
The Pound (GBP) rose against the weaker Australian Dollar (AUD) today in spite of UK Prime Minister Boris Johnson is due to attend an emergency Cobra meeting to address the nation’s coronavirus outbreak.
Meanwhile, Sterling has continued to benefit from yesterday’s newly-appointed Chancellor Rishi Sunak’s announcement of the Spring Budget.
Analysts at TD Securities commented:
‘The Pound has been fairly slow to react to [the] budget, but we think the outlook has brightened. That is particularly the case when we take [the] comprehensive policy package in its entirety.’
Today also saw the release of February’s UK RICS Housing Price Balance report, which beat forecasts and rose from 18% to 29%.
Simon Rubinsohn, RICS’s Chief Economist, was cautious in his assessment, saying:
‘For now at least, feedback around expectations are consistent with activity levels continuing to strengthen albeit relatively modestly.’
GBP/AUD Outlook: Could Sterling Sink on Gloomy BoE Meeting Minutes?
Pound (GBP) investors are looking ahead to tomorrow’s release of the Bank of England’s (BoE) Monetary Policy Committee meeting minutes.
‘Aussie’ traders will continue to eye global coronavirus developments. Any signs that this could further push the Australian economy towards a recession would prove AUD-negative.
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TAGS: Australian Dollar Forecasts Pound Australian Dollar Forecasts