Australian Dollar Slumps Amidst Coronavirus Fears as GBP Awaits BoE Decision

The AUD is surrounded in volatility surrounding the Coronavirus outbreak which has plagued China and continues to spread further afield. News yesterday of the number of cases of the Wuhan coronavirus rising sent the AUD slumping alongside the Chinese Yuan. Being so close in proximity and being so heavily linked with the infected country has caused a crash in the risk-sensitive Aussie dollar. Meanwhile, investors in GBP will be awaiting Thursday’s BoE rate cut decision. With recent gains experienced by the UK, investors will be hoping the central bank can stave off a cut and keep the momentum rolling for the pound.

Australian Dollar Sinks as Coronavirus Cases Rise
The pound to Australian dollar rate rose yesterday by 0.45%, trading at around 1.92897 as the Aussie fell on the reports of the spreading Coronavirus. The Pound was not the only currency the AUD lost out to amidst the news, it also saw losses against the USD and EUR. Many are predicting that the spread of the virus will incur a ‘risk-off’ mood which is likely to continue for a while. As a risk-sensitive currency, AUD is likely to suffer until the virus begins to be contained, but that appears no easy task.

However, despite the sink, AUD investors noted that the moves made yesterday may have been exaggerated thanks to low liquidity due to markets in China, Hong Kong, Singapore and Australia being closed for holidays. Furthermore, there had been little movement in the other major currencies as investors remained focused on the outbreak of the virus and China.

GBP Awaits BoE Decision Which Could See Further Gains on the GBP/AUD Exchange Rate
The UK is expected an interest rate decision from the Bank of England (BoE) this Thursday. Recent bets were tipped at around a 60% chance in favour of a cut, but more recent economic figures impressed the markets and some beat records which has changed the tune of the UK economic outlook. Investors will be hoping that this could be enough to spur the Bank of England on to hold the interest rate at 0.75%. If this is the case, the GBP would likely rise as confidence in the currency restores and investors flock back. But if the BoE vote in favour of a cut, the GBP would likely see a drop and lose the recent gains made from the economic data.

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