GBP/AUD: Sterling an Idiosyncratic Haven from COVID-19

The British pound was higher against the Australian dollar on Tuesday with Sterling the top rising G10 currency. Sterling’s recent trading performance has shown an idiosyncratic independence from the coronavirus outbreak that has beset other currencies.

GBP/AUD was up by 108 pips (+0.55%) to 1.9683 with a daily price range of 1.952 to 1.971 as of 3.30pm GMT. GBP/AUD jolted above 1.96 in early trading before later finding resistance just short of 1.97. The exchange rate is up 0.4% on the week.

The Australian dollar

The Australian dollar is nearing the 3 ½ year lows set against the pound earlier this month as coronavirus concerns beset the Asian-Pacific region. South Korea has reported 84 new cases of the virus with the total number of cases now approaching 1000. Although the number of cases in China is coming down, an apparent predetermined narrative about the direction of travel for the case numbers is raising questions of reliability.

The wider concern is that supply chains have already been impaired and may take some time to recover and may never fully re-emerge in the same shape as businesses seek to diversify in cases of future problems. This explains comments from a China NDRC official that regions of China deemed low risk should remove travel restrictions and resume normal activity.

The British pound

The British pound has gone through a relatively stable period when contrasted to other currencies that are being affected by the risk on-risk off tone across broader markets.  This has been possible because markets have been focused on the upcoming trade talks, set to begin next week. The UK distributive trades survey is not a big market mover so and missed expectations went largely unnoticed and were not a cause for any losses in the British currency.

The EU published its mandate for the talks, but it has been greeted by silence from London. The UK releases its own version on Thursday when a few sparks could start to fly about the EU desire to impose so-called ‘level playing field’ rules on the UK when no such requirements were put on Canada in its FTA.

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