GBPAUD Rate: Renewed Risk Appetite Continues to Benefit the Australian Dollar

GBP AUD Higher Ahead of Bank of England Rates

The Australian dollar continues to make gains versus the pound as risk appetite continues to increase. Having traded at its strongest level since January 2016 versus the AU dollar, the pound continues to decline and currently sits just over 1.90 to the AUD, a fall of over 8 percent since the March 19th high for the pound. The Australian dollar continues to be bought as investors risk appetite returns to the currency markets despite the economic impact of Coronavirus down under. House prices continue to drop, employment rise and lockdown measures continue to stem the threat of Covid-19 in Australia, but the recent fall in value makes the Australian dollar an attractive asset for investors.

Tensions Rise With China as a Call for Further Investigation in to the Outbreak of Coronavirus is Met With Hostility

With a huge pool of natural resource at their disposal, the Australian economy has historically been more resilient to global economic downturns due to the level of exports for their raw commodities including iron ore, gold, wheat, beef and wine – of which China has been a key buyer. As Chinese industry and wealth has boosted over the past 50 years, the demand for raw goods from Australia has seen over 25% of all Australian exports heading to China. As Scott Morrison’s government pushes for a review in to the origin and handling of Covid-19 the threat of economic retaliation from China is a huge cause for concern, and a longer term risk to the value of the Australian dollar.

Amidst rumours circling that there is increasing pressure from Beijing to water down calls to investigate the outbreak worldwide, Chinese Ambassador to Australia, Cheng Jingye has been highlighting the impact a drop in demand for exports and a reduction in tourism from China could have.

UK Government Continues to Avoid Placing Any Timescales on Easing Lockdown Measures

The UK government, wary of the significant impact of Covid-19 in the UK are still refusing to be pushed on a time frame to ease lockdown restrictions. As much of Europe announce specific plans and loose timeframes on emerging from lockdown and economic stalemate the UK government will only reinforce their five step measure on how they will assess the time is right to ease current restrictions. The five tests to modify lockdown measures are that the NHS is fully kitted out, rate of deaths are declining, rate of infections declining, operational challenges for NHS (eg PPE) are met and the risk of reinfection low. This is potentially impacting the value of the Pound as it struggles for traction against the Australian Dollar.

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