• Australian Dollar (AUD) rallies as hopes grow that a vaccine could be approved later this year
  • Chinese trade data in focus, further signs of economic recovery to drive AUD, the Chinese proxy
  • Fiscal stimulus optimism offers support to the Pound (GBP) whilst Brexit drags on demand
  • BoE Governor Andrew Bailey due to speak later today

After rallying 1% across the previous week, the Pound Australian Dollar is trending lower on Monday. The pair settled on Friday at 1.8162. At 08:15 UTC, GBP/AUD trades -0.3% at 1.8110.

The Australian Dollar was under pressure in the previous week as fears over rising coronavirus numbers both in Australia and the US dented market sentiment. Melbourne, Australia’s second largest city went back into lockdown last week in an attempt to control a second wave of covid-19. Concerns over the impact that a second lockdown would have on the Australian economic recovery dragged on demand for the Aussie Dollar.

The mood in the market is much more upbeat on Monday on positive news flow surrounding coronavirus drug treatments and vaccines. In a study, Remdesivir, the covid-19 treatment drug produced by Gilead, proved to reduce fatalities in covid-19 patients by 62%. Furthermore, Pfizer and BioNTech announced that the vaccine that they are working on together could get FDA approval before the end of the year.

A vaccine is the surest and quickest way for the global economy to return to pre-coronavirus growth levels. Therefore, good news surrounding vaccine developments has the potential to boost risk sentiment, driving demand for riskier currencies such as the Aussie Dollar.

Looking ahead, investors will focus on Chinese trade data due overnight. Continued signs of the economic recovery will keep sentiment buoyed and could lift the Chinese proxy, the Australian Dollar.

The Pound was trading broadly higher versus its peers across the previous week following the announcement of a stimulus package by Rishi Sunak. The Chancellor laid out spending plans to the tune of £30 billion to guide the British economy out of its deepest downturn in 300 years.

Brexit continues to act as a drag on the Pound after post Brexit trade talks last week made little progress.

There is no high impacting UK data due for release today. Investors will look ahead to a speech by Bank of England Governor Andrew Bailey before UK GDP data tomorrow.

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