The British pound was higher against the Australian dollar on Thursday as a downturn in market sentiment due to resurfacing coronavirus fears saw the Aussie erase some of its recent gains against the pound.
GBP/AUD was up by 145 pips (+0.75%) to 1.9565 with a daily price range of 1.9409 to 1.9623 as of 4pm GMT.
Having found a base above 1.94, GBP/AUD surged to 1.96 before the gains were faded towards the end of the day. Thursday’s rise dims the losses this week to just -0.63%.
The British pound
With no signs of an emergency Bank of England rate cut yet, the pound has shot higher on Thursday against the Aussie dollar, though gains are muted elsewhere. The pound is a little softer this week, since irrespective of the timing an interest rate cut looks almost a given in Great Britain.
Remarks from EU Chief Brexit negotiator Michel Barnier about the difficulty of the end of the transition period had a modest effect on Sterling. The short timeframe from which to achieve a deal, alongside differences of opinion on level playing field arrangements are obviously a source of frustration for the EU, though most, including Barnier think a deal is attainable.
The Australian dollar
Better than forecast trade data did little to aid the Australian dollar amid waning market sentiment. The likely big drop in Australian exports to China, its biggest customer has been one of the central themes driving the Aussie lower this year. Australia’s January trade surplous fell less than expected to 5,210 million from 5,223 million in December. Clearly the worst is yet to come, hence the data being largely dismissed by traders.
The bigger drive for the aussie was the sharp deterioration in sentiment characterised by big opening declines on Wall Street, that have washed away most of the so-called ‘Biden bounce’ from Wednesday. The VIX index often used as a ‘fear gauge’ for the market rose 16% in the first hour of trading. The Aussie will struggle to make headway while the coronavirus effect on global growth is still so uncertain.
