The Australian dollar to pound exchange rate has started this week on the front foot, strengthening by as much as 0.5% throughout Monday morning’s trading session. The pound has been weakening across the board amidst Brexit negotiations starting up again this week, and the AUD’s position has strengthened with some positive news regarding a potential vaccine. There does however remain to be some downside risk to AUD value with concerns over the impact of further lockdown measures in the coming months.
Australia Reach Vaccine Deal and Virus Cases Hit 10-Week Low
On Monday morning Australian Prime Minister, Scott Morrison, announced that a deal has been struck to receive Coronavirus vaccines in January 2021, and with new cases hitting a 10-week low in Victoria, AUD rates have seen a significant spike. In his announcement, Morrison stated, “Australia needs some hope. Today, we take another significant step to protect the health of Australians against the coronavirus pandemic.”
The deal signed with CSL is to manufacture two vaccines being developed by AstraZeneca and Oxford University. There is hope that the CSL vaccine could hit the market in mid-2021 and the news has helped AUD rates spike to a 7-day high against GBP. This comes as lockdown has been extended in Melbourne over the weekend to the end of September as although cases are at a 10-week low across Victoria, Melbourne is still a hotspot for the spread of the virus and cases there have slowed at a worse rate than expected.
How Will Increased Lockdown Measures Affect AUD Exchange Rates?
This news of increased lockdown measures could continue to harm the economy going forward and therefore the value of AUD as a result. Job losses have been a real concern across the state of Victoria of late due to the reintroduction of lockdown measures and there is a fear that this issue could deepen as a result of the tighter measures being introduced in Melbourne. Wesfarmers are a retail giant in Australia and their CEO Rob Scott has warned how the extended lockdown measures will negatively affect the economy. “I worry that this latest announcement creates more uncertainty and hardship and will inflict a greater personal and economic cost, not just to the people of Melbourne but the whole of Australia,” he said.
According to the National Treasury Department the original six-week lockdown period had already resulted in around 250,000 job losses in Victoria alone. If this number continues to rise, then it is likely to weigh on AUD value going forward.
FX Analysts Downgrade AUD Stance
Although AUD has gained against Sterling for the start of this week, FX strategists Nomura have downgraded their view on the Aussie from positive to neutral over fears of the future performance of the Australian economy. Although this hasn’t been reflected in AUD value yet, this could signal the chance of AUD weakness moving forward if this stance is mirrored amongst other FX analysts. As such any clients with an Australian Dollar requirement may wish to keep a close eye on any developments on this topic over the coming weeks as it is likely to create significant AUD volatility.
GBP to remain volatile amid Brexit negotiations this week
As far as GBP value is concerned it looks as though the most significant driver this week will be the continuation of Brexit talks between UK and EU negotiators. Lloyds bank have stated this morning in their daily economic bulletin, “With Brexit talks starting again this week, headlines raising the risks of no agreement between the UK and EU are already putting the pound under pressure.” The two sides are still at logger heads over fair competition and UK fisheries, and until the impasse can be broken there are fears that the UK will leave the EU without a trade deal at the end of this year which is likely to cause significant currency market volatility due to the uncertainty that this carries. Any developments on this topic throughout the week are likely to have a significant impact on AUDGBOP exchange rates and you can contact your account manager here to stay up to speed with all the latest news.
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