The pound to Australian dollar (GBP/AUD) exchange rate traded lower for the majority of the week last week, but as GBP saw slight recovery, it was able to gain ground against the Aussie dollar. The Australian currency has struggled against many of its counterparts throughout 2020 as it continues to be held back by its trade and risk correlation. The coronavirus has continued to pile on pressure for AUD and is set to limit the currency in the next week against other major currencies like the pound.
Poor previous week sees AUD struggle up ahead
Opening last week at 1.9700, the GBP/AUD exchange rate spent a large portion of the week trading lower as the Aussie dollar rebounded from it’s previous lows. At one point in the week, the pairing traded at 1.9300, which was the lowest level in a fortnight for the two. However, shortly after this, GBP/AUD saw a rebound in demand, which saw GBP recover half of the week’s losses on Friday. The Australian dollar continues to struggle as it is highly correlated to risk and trade, and with both taking a heavy beating amid the coronavirus outbreak, AUD has fell out of favour with investors for a great deal of 2020. The infection and death tolls continue to rise across the globe, which will only mean sustained pressure on the struggling currency in the weeks ahead, providing traders an opportunity to take advantage of the higher GBP rates as AUD continues to struggle.
Coronavirus situation set to worsen in the UK
The number of confirmed cases of coronavirus COVID-19 has risen quite rapidly in the past week in the UK. The number has surpassed 200 cases and as a result, further developments in the coronavirus situation are likely to remain in the investor spotlight over the coming weeks. Should the situation worsen significantly, concerns will rise over economic impact. The government could begin to implement measures to prevent the spread of the disease, and the Bank of England (BoE) interest rate cut odds may heighten further. One factor which may help GBP, are the upcoming UK economic data releases. Wednesday will see the UK’s January growth rate results, production and trade statistics, these reports tend to be influential and should they provide positive returns, the coronavirus and BoE impacts may be softened slightly.
Meanwhile, for the Australian economy, little is set to be released in the upcoming week. This means that the focus will remain on the coronavirus and its impact on the Aussie economy. But AUD could see a slight boost if Australian confidence stats due throughout the week impress the market.
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