The pound is fragile during times of global economic uncertainty and you can see this clearly by the fall in value against the Australian dollar. At the beginning of the Coronavirus outbreak we saw the Australian dollar suffer due to its close trade ties with China. Australia is heavily dependent on the china purchasing its goods and services, and if we see a fall in growth this often has a knock on effect to the Australian economy.
It was a only a short time ago that the GBPAUD exchange rate sat above 2.00. We now sit in the 1.93s. The pound is not the destination of choice during periods of uncertainty. The imbalance between imports and exports makes it vulnerable. There is also the small matter of Brexit to contend with.
How is Brexit likely to play out amidst COVID-19?
Even if it were not for the Coronavirus, Brexit could hold back sterling from making more substantial gains. At present it seems PM Boris Johnson does not have any intention to approve an extension on trade talks despite time for negotiations being limited due to the virus outbreak.
A major concern amongst investors is the threat of a no deal scenario, and with no deadline announced this is a real possibility. Boris may think he can beat Corona both personally and collectively in the UK and then go on to thrash out a trade deal but time is certainly against him. It may be the case that the threat of a no deal will hurt both sides and could be used as ammunition during negotiations to gain better terms. A dangerous game that will certainly not benefit the pound in the meantime.
If it is the case that an extension is announced, we could see the pound strengthen against the Australian dollar.
If you have a currency requirement involving GBPAUD please do not hesitate to contact me using the form below. I will be happy to assist and will try and help you make an informed decision as to when to trade to try and maximise your return.