AUD to GBP Rate Pauses at the 2020 Highs

AUDGBP: Sterling Breaks Out from Stubborn Range

The AUD to GBP exchange rate was taking a pause at the 2020 highs around 0.5730. Traders have been buying the Aussie currency as the economy outperforms the pound sterling despite both countries struggling with the coronavirus. Markets may be somewhat quiet in early trading as traders await the latest Non-Farm Payrolls figures. Stock markets and commodities saw further gains after the certification of the US election increased hopes of a smooth transition of power on the 20th January.

AUDGBP was trading flat on Friday at 0.5720 but the pair has seen limited selling at this level.

Australia Chooses the Heavy-Handed Lockdown Approach

A further lockdown in Australia saw 2.5 million Queenslanders being pushed back into lockdown, while Greater Brisbane has been declared a national hotspot due to a single new case of the coronavirus. The case is said to be one of the new strain, which is currently being seen in the UK, although Australia’s borders are largely closed.

Australia’s Prime Minister Scott Morrison, who was a previous critic of the harsh lockdowns has backed the latest lockdown and border controls. Asked if cities will continue to lock down over one case the PM said:

“We will see – that’s my honest answer”.

Morrison also announced strict new measures for travel with anyone arriving in the country requiring a negative coronavirus test. Masks will also be mandatory on all flights going forward. Flight caps for international arrivals are also being considered for the next month.

The return of government lockdown measures in Australia are a risk to the country’s economic gains with the Aussie currency gaining on strong iron ore prices, a solid jobs market and business outlook.

Next Week Sees Pound GDP Released

The week ahead will see more action for the AUD to GBP exchange rate with the release of consumer confidence from Australia on Tuesday and the latest UK GDP numbers on Friday. The UK number will give investors an idea of how the UK economy is performing amidst the latest virus measures.

The pound is seeking a catalyst after the currency saw very-little gains from the signing of the Brexit agreement. After all of the drama for almost four years about the threat of a No Deal Brexit to the UK economy, the currency has barely moved on the signing of a trading deal.

The Bank of England Governor Andrew Bailey told MPs that the recent Brexit agreement could add to the country’s economic woes with a hit relative to £80 billion, but gave little in the way of details. The bank has already squeezed interest rates to a record low of 0.1% and the bank had mulled negative interest rates in the event of No Deal. The continued reliance on lockdowns could still see this as a reality as vaccines are unlikely to have much effect until at least the second quarter.

The big weight on the pound is the current struggle with the virus and traders will have to see how the vaccine rollout goes in order to gauge how soon the economy can get back to normal levels.

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