GBP/AUD: Aussie Weathers Morrison Coronavirus Warning

The Pound sterling is lower against the Australian dollar on Thursday with a rebound in risk sentiment coming to the aid of the Aussie while what looks like a difficult road ahead in UK/EU trade negotiations hurt Sterling.

GBP/AUD was lower by 80 pips (-0.42%) to 1.9184 with a daily price range of 1.916 to 1.928 as of 2.30pm GMT. After popping above 0.9250 in early trade the currency pair slid back beneath 1.92, adding to Wednesday’s loss of -0.46% and a weekly decline of -2.68%.

The Aussie

The plans to cut tariffs on $75bn US goods as part of the phase one trade deal helped further alleviate concerns of a slowdown in international trade. The Australian dollar has clung onto big weekly gains against the pound on the idea that China’s economy can weather the storm of the coronavirus and its trade conflict with the US.

The prospect of a cure or vaccine for the coronavirus touted by some scientists is helping markets to continue pricing out economic damage from the outbreak in China. Bullish spirits outweighed a warning from Australian Prime Minister Scott Morrison. Morrison said the impact of the outbreak on Australia’s economy is likely to be ‘significant’ because of the forceful travel restrictions in place that are preventing Australians travelling to their biggest export market.

The pound

The economic calendar for the UK is rather sparse for the rest of the week so traders were left feeling exasperated about important UK economic sectors like financial services taking a hit in any new Free Trade Agreement (FTA) between the EU and UK. The pound has contained its weekly losses to the Aussie around the 1.92 level thanks in part to some better UK economic data.

Another downturn in risk sentiment hurting the Aussie dollar more than the British pound seems like the best chance for an end-of-week recovery from the slump due to Boris Johnson’s speech on Monday. The path to Johnson’s new ‘Global Britain’ is via a tough trade pact with the EU that keeps the UK economy afloat while being flexible enough to do other trade deals.

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