The pound has moved over 2.5% from high to low versus the Australian dollar as it fails to maintain it’s position at over 2.00 AUD. The pound has been hampered over recent days as market fears begin to calm. The uncertainty felt throughout March as coronavirus began to spread at pace outside of China has now wained as the global pandemic has taken hold. Despite trading below 2.00 it is worth reminding those who need to purchase Australian dollars that at 1.9828 (current interbank rates) these are still some of the best rates to purchase AUD since the UK referendum on Europe in June 2016.
European Trade Negotiations Still a Stumbling Block for the Pound
Although the pound is performing strongly, it could continue to be held back by the lack of progress with trade negotiations with the EU. No longer a member of the European Union, the UK has until December 31st to set out its trading relationship for the future with the EU. If no such agreement is reached, we default to a ‘no deal’ scenario with significant cost and barriers to trading between the UK and Europe.
Boris Johnson has stated on numerous occasions there will be no extension in trade talks past 2020, admittedly this was pre-corona and of course the virus could not have been predicted, but an extension has yet to be announced. Although unlikely that the UK will not make this request, until there is more clarity on trade the value of the pound could be impacted.
Australian Consumer Confidence Plummets
Australian consumer confidence recorded its biggest fall ever as households in Australia adjusted to government restrictions in the wake of the coronavirus spread. With only 6,500 reported cases and 62 deaths at the time of writing so far the Australian economy has suffered significantly in comparison to the population.
The Chinese Economy Has a Significant Impact on Australia
Australia relies heavily on China as a trading partner and therefore if the Chinese economy falters so to does the economy in Australia. Part of AUD strength in recent days can also therefore be attributed to the Chinese returning to work as factories have re-opened. Chinese GDP for March is to be released overnight and amidst much talk of a historical number this could be a risk to the current strength seen in the pound v, Australian dollar rates, how far a historical low in Chinese growth can push the pound remains to be seen.
For more information on factors influencing GBPAUD exchange rates for an upcoming currency transfer, feel free to contact myself, Lauren Buckner, using the form below.