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GBP to AUD Exchange Rate Avoids Losses despite Fresh UK Lockdown Confusion

July 31, 2020 - Written by Ben Hughes

Despite a lack of solid fresh support for the Pound, the British Pound to Australian Dollar (GBP/AUD) exchange rate has seen a solid jump in demand over the past week. The Australian Dollar is being weighed as investors move away from currencies correlated to risk and look for safer investments, as coronavirus infections worsen and fears of a ‘second wave’ of the pandemic intensify.

After opening this week at the level of 1.8011, GBP/AUD briefly saw mixed movement before picking up as the week went on. Yesterday GBP/AUD saw impressive gains of over a cent that briefly took the pair to a high of 1.8315. This was the best level for GBP/AUD in about a month and a half, since mid-June.

While GBP/AUD has struggled to hold those best levels, the pair has sustained most of this week’s impressive gains. At the time of writing on Friday, GBP/AUD trends near the level of 1.8256, over two cents above the week’s opening levels.

GBP Exchange Rates Lack Drive to Sustain Bigger Gains amid Fresh UK Lockdowns

The Pound has spent most of this week climbing. This has largely been due to big weakness in rival currencies.

The US Dollar (USD) has plunged as the market’s outlook for the US handling of the coronavirus pandemic becomes more and more worrying.

With the UK handling of the coronavirus pandemic seen as fairly good in comparison to the US handling, the Pound has been capitalising on the US Dollar’s losses this week.

However, the Pound and UK outlooks are still filled with concerns and uncertainty compared to many other major economies.

Overnight, the UK government announced fresh lockdown plans for certain parts of North England. Greater Manchester, East Lancashire, West Yorkshire and Leicester will all see varying levels of new lockdown amid worsening coronavirus cases in those regions.

While some analysts are relieved the UK government is still tackling infections, others criticised the government’s lack of clear signalling in these new, sudden plans.

According to Yohay Elam, Analyst at FXStreet:

‘North in Lockdown 2 – the headline of one of Britain's tabloids sums up the developments with which around 4.3 million Brits living in Manchester and in other parts of northern England have to deal with. The spike in cases in these regions triggered an announcement late on Thursday, triggering confusion.’

AUD Exchange Rates Lack Drive as Victoria Remains in Lockdown

The Australian Dollar has been among the currencies hit hard by shifts in market coronavirus fears in the past week.

As the number of coronavirus cases worsens again around the world, fears of a ‘second wave’ are surging. US numbers continue to soar, and the Federal Reserve has become more dovish as a result.

Cases also continue to rise in Australia’s State of Victoria. The state remains in lockdown as Australian officials attempt to get a hold of the pandemic, but concerns persist that the coronavirus will continue to hurt Australia’s economic activity.

According to Analysts at ANZ Bank:

‘On a domestic front, virus outbreaks across Victoria and New South Wales will challenge the prior view that Australia emerged from COVID-19 in a stronger position relative to peers. Instead, a sustained period of slowdown is now likely, challenging key service sectors in addition to the prolonged hit expected from a lack of migration and tourism.’

GBP/AUD Exchange Rate Forecast: Could PMIs Bolster Pound Support?

The Pound outlook remains filled with uncertainties, despite the British currency’s strong performance over the past week.

With coronavirus and Brexit concerns still dominating the Pound outlook, the currency may struggle to keep gaining. GBP/AUD may be more likely to keep climbing if coronavirus fears hurt the Australian Dollar more than Sterling.

The Pound could find some more solid support if the coming week’s UK data impresses investors though.

Britain’s final July PMI results will be published early in the week. If these beat forecasts they could boost hopes that Britain’s economy is seeing a rebound in activity.

Australian PMI data is due around the same time and could influence the ‘Aussie’.

Still, the Australian Dollar is more likely to be driven by global shifts in market risk sentiment.

Next week will see the Bank of England (BoE) hold its August policy decision, which could also drive some Pound to Australian Dollar exchange rate movement.
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