Australia has reintroduced lockdowns in the Victoria area after new COVID-19 cases appear continue to rise. There has been a report today of 288 new cases, the highest on record for any part of the country since the pandemic started. Australia was acknowledged as one of the best handlers of the initial outbreak as they very swiftly stopped a major outbreak. However as they have started to reopen their borders it appears there could be trickier times ahead.
The only people allowed to re-enter the country are citizens, and the government has made the choice to even limit the number of citizens who’re coming back in each day. The quarantine hotels that were set-up are at maximum capacity and the amount of people looking to return is increasing. The government will be keen to keep the rules stringent especially when there is so much at stake with a potential outbreak.
In the last few days, the news of cases rising in Australia hasn’t gone a miss in the currency market. The AUDGBP rate is currently hovering in the 0.55, with sterling gaining two cents in the last few days. Whilst there has been a small amount of positive new for the UK with regards to Brexit which has helped the pound, the uncertainty surrounding a second outbreak in Australia could have a greater impact.
The Australian economy was one of the first to return to relatively normal life. If you watch any Australian sports you will see people in the crowds, this has enormously helped the prospects to the Aussie. If there should be a second outbreak and another major lockdown a lot of good work that has been done for the economy could be undone. If you’re looking at selling Australian dollars with the prospect of Coronavirus disruption in the near future it may be beneficial to consider your options at this point. Holding on to see if the Aussie will continue to strengthen against Sterling considering it has gained 10% in the last few months might bring more risks than rewards.
UK Hope Rests on the Chancellor’s Plans
The AUDGBP rate has had a very one way path in the last few months, seeing a rise from 0.552 to 0.558. This was mainly due to the impact of Coronavirus in the UK and the concerns surrounding a no deal Brexit. Both of these situations are much better placed than they were 6 weeks ago, with positivity surrounding Brexit talks coming out and hope that a initial agreement will be in place for final details to be sorted in the Autumn.
Secondly whilst the UK has been hit very hard by the Coronavirus outbreak the Chancellor Rishi Sunak has put together a comprehensive plan to try and kick start the economy which in the next 4-6 weeks might result in positive economic date for the UK. If the UK does manage to follow a V-recovery path and we see an immediate bounce back from the economy then the value of Sterling could be positive impact.
There is always a risk that like most economies should there be a widespread outbreak in the UK a second lockdown like the one seen in Leicester could have a adverse effect on the UK. It’s hard to see how following the UK’s Coronavirus bailout funds reaching the equivalent of 7.2% GDP the Chancellor being prepared to do it all again.
Finally with Brexit talks you can never be certain of a positive outcome. The EU are infamous for leaving everything to the last minute and the fact we’re 5 months from the deadline of the 31st December there is still plenty of time for cracks to start to appear. The fallout from Covid-19 has had a far worse effect on the economy than anyone envisaged leaving the EU would have, which might help the UK from a negotiating stand point as the threat of economic ruin is essentially already playing out. The Pound has taken a hammering in the last few months and as the world starts to begin to return to normality there is scope for sterling strength. Whilst we may not see the currency return to great heights it would be reasonable to suggests that a rise of 2-3% against most major currencies especially the Australian Dollar would not be a overly zealous jump.
If you have an AUDGBP currency exchange to make and would like to discuss the factors likely to impact exchange rates, you can get in touch using the form below. I’ll be happy to get in touch personally and discuss your enquiry.