The Pound to Australian Dollar exchange rate has enjoyed a mixed start to the week with plenty of volatility and a significant shift in the high-low value. AUD started the week on Monday on the front foot against the Pound having recorded a fall in Coronavirus cases, but a fall in the DOW Jones and a significant economic downturn in Japan has seen investor risk sentiment sink and therefore weakened demand in the Aussie.
Why is the AUD Falling in Value?
The overall trend this week in AUD value has seen the currency weaken compared to the beginning of the month, particularly against Sterling. Over the past 30 days we have seen a shift in GBPAUD exchange rates of almost 4%. This shift in AUD value over that period means that a purchase of $500,000 is almost £10,000 cheaper this week compared with the end of July. At Foreign Currency Direct we offer a range of contract options to help you keep up to speed with all the latest market movements and assist you in timing your transfer effectively.
In terms of the long-term value of AUD, the main positive for the currency this week has been the news of Coronavirus cases falling, as the strength of the Aussie has been closely linked to the impact of the pandemic. On Tuesday Australia announced their lowest number of new infections in a month, and there is now a positive feeling across the nation that the latest lockdown measures introduced are helping to bring the spike in cases back down to more manageable levels. “We have seen numbers going up and down recently, but by and large what we are seeing is a continuing downward trend,” Australia’s Deputy Chief Medical Officer Michael Kidd told reporters in Canberra yesterday.
Falling Coronavirus Cases Could Strengthen AUD Longer Term
Although this positive sentiment has not yet been matched in AUD’s value just yet, it is likely that as the virus is continued to be kept under control, the currency will begin to strengthen as lockdown measures can begin to be eased and confidence in the economy returns. We saw at the beginning of the pandemic that as Australia controlled the spread of the virus far more effectively than many other nations the currency strengthened and if this momentum can be regained it is likely AUD exchange rates will rebound.
AUD value has also been impacted by risk sentiment and stock market trends and the drop in the DOW Jones this week has been a factor behind AUD weakness. One other factor which may have caused the fall in AUD exchange rates this week is the news of an economic downturn in Australia’s second largest trade partner, Japan, in Q2 of this year. As a result of the pandemic the Japanese economy shrank a record 28% in the period and there is a worrying rise in infections again which is causing a great deal of uncertainty. Australia rely on their exports to Japan and this downturn in the economy could affect exports to the country in the future, which would have a negative impact on AUD value.
How Will Brexit Negotiations Affect GBPAUD?
GBP value against AUD this week could be significantly affected by reports from UK and EU negotiators this week in their aim to thrash out a Brexit deal before October this year. Talks are continuing this week and are likely to be focussed on meeting an agreement on UK fisheries which has been a major stumbling block to a deal so far. It is likely that any leaks from these meetings into the media will have a significant impact on GBP value. Based on how GBP has been affected so far, if there appears to be news of a deal looking likely, we could see GBP strengthen. If you have an upcoming GBPAUD transfer to make it is certainly worth keeping an eye on this topic throughout the week.
Other data to look out for this week that could have an impact on AUD exchange rates include Australian service and manufacturing Purchasing Manager’s Index (PMI) numbers on Friday which will give a good indication in to how the economy is performing overall. Retail sales from the UK on Friday could also provide volatility and if there is expected to be a resurgence in these numbers since lockdown measures are continuing to be relaxed. Keeping in contact with your account manager here can help you keep up to speed with all the latest market developments as they happen and could help you save money on your upcoming currency requirements.