Pound-to-Australian Dollar Sees 2-Year Lows

This week, the British Pound sunk to its lowest level in two years, sending currency dealers and holders of Sterling scrambling to sell off the still-declining currency while they can. It is a continued trend of depreciation that we have seen for several months now, with the British Pound now measuring 1.7755 against the Australian dollar. While there is no single reason for the GBP/AUD exchange to tank almost 15 percent in recent months, experts agree the British Pound has taken a much more significant hit from the coronavirus pandemic than its southerly counterpart, which was able to ease lockdown measures much faster than the UK did. 

UK business in particular has been hit hard by COVID, with businesses collapsing and the services sector falling to 12.3 - its lowest level in over 20 years. The UK Purchasing Managers Index (PMI) surveys for the manufacturing and services sectors is depressing to say the least, and with the oncoming period of UK recession it is expected to get even worse. In fact there is talk of a ‘U shape’ recovery, signalling that things will most certainly get worse before they get better for the UK. 

But it’s not just COVID that is hurting the British pound; Australia is getting some serious tailwind from the spike in commodities (metals and energy) and GBP is still considered risky due to Brexit. As the UK negotiates its exit from its longstanding relationship with the EU, the world lies in wait to see which abrupt and wide sweeping changes will result from the discussions. 

For currency dealers sitting back hoping that the Pound-to-Aussie Dollar relationship takes an abrupt turnaround, experts are advising that that won’t happen anytime soon. And it seems that it is less because of the weakness of the GBP, and more due to the current strength of the Aussie Dollar. When compared to the US Dollar, which has fallen sharply for more reason than one - the coronavirus pandemic, mayhem across the majority of its cities and the fallout from the Black Lives Matter protests raging across the country among them - the Aussie is in fact the best performing currency of the day, according to Pound Sterling Live. 

The general consensus until recently has been that economic conditions had stabilised and the downturn had been less severe than earlier expected. But given yesterday’s announcement on Australia’s harsh economic reality - that it is seeing its biggest deficit since World War 2, at the $184 billion mark - this optimism will fade. Especially if a potential second lockdown is announced in NSW, where cases are surging and things appear to be going on the same path as Victoria, this confidence in AUD will drop significantly.