GBP/AUD Touches Highest Level Since 2016

GBP/AUD updated the highest level since 2016 early in the morning after gaining over 2% since February 20. Currently, GBP/AUD is trading at 1.9751, up 0.35% as of 7:00 AM UTC. The price faces resistance after breaking slightly higher than the January peak.

GBP/AUD: Aussie Continues to Drop on Coronavirus Fears

The Aussie couldn’t leverage the pound weakness amid tensions between Britain and the European Union. The currency continues to decline amid fears of the coronavirus epidemic and its impact on Australia’s trade-reliant economy.

ANZ analysts said in a note to investors:

“Reduced trade and people flows, workplace absenteeism, supply chain disruption, and the impact on consumer and business sentiment are all going to weigh on growth. We revised our Australian outlook lower earlier this month, but the risks are firmly tilted to the downside at present.”

A gauge of construction work done showed that Australia’s economy was struggling even before the coronavirus started to spread. The Australian Bureau of Statistics (ABS) said that the value of construction work done declined by 3% in the three months to December, while analysts anticipated a drop by 0.1%. National Australia Bank (NAB) economists anticipate that the latest economic update would subtract about 0.4% from the economic growth of the last quarter of 2019.

Australia will release its gross domestic product (GDP) data on March 4. Economists expect that weak household consumption would hurt the economy.

While markets don’t expect the Reserve Bank of Australia (RBA) to cut the interest rate at its next meeting on March 3, investors price in a 38% chance of a 0.25% cut in April. The probability of a cut in May jumped to 66%, while June was put at 82%.

Elsewhere, the pound is itself struggling against majors, trading flat against JPY and declining against the US dollar.

Britain is set to start trade talks with the European Union next Monday. Officials from both sides anticipate that negotiations will be very hard and that the UK might not be able to secure a deal by the end of this year.

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