- GBP/AUD formed a downward flag pattern towards 1.79935 during the COVID-19 pandemic making the pair react to the bearish trendline.
- The economy, tourism, trade patterns, inflation, devaluation of interest rates, and economic growths of countries outside the UK are the reasons why GBP is unlikely to get stronger.
- Factors that affect the exchange rate of GBP include the economy of the UK, politics, and other currencies.
GBP/AUD price trapped inside a short-term range without progress to the upside and downside. It also formed a similar downward flag pattern in the lead. The bearish signal of 1.80722 favors a falling movement towards 1.79935, making the GBP/AUD pair vulnerable to the price drop.
The red lines bearish flags of GBP/AUD combined with the bearish patterns of lower lows and lower highs. Its price is moving aggressively further down, then consolidates, and this pattern continues. There is no bullish movement of prices in the opposite direction of the Relative Strength Index (RSI) technical indicator. As the price moves laterally, it moves higher to alleviate the pressure from overbought and oversold levels.
The price is highly probable to see another breakdown this week towards the level of 1.81037.
Bank Forecast for GBP
GBP is expected to rise steadily by about 1.8160 in FY2021. However, financial experts concur that many risks could impact this forecast. Based on the FOREX chart patterns, the GBP/AUD is unlikely to get stronger this year. Although the lockdowns in several countries have been relieved and the climate of commodity exports is good, the international perimeters are slowly opening due to the dire effects of the COVID-19 pandemic.
The UK mainly relies on industry, energy, mining, and manufacturing as the source of its exports; therefore, the country will continue to struggle economically and financially. Things could turn out negative very quickly, although the average forecast for GBP is improving this year. Luckily, financial institutions predicted that the AUD would remain weak in 2021, allowing a level of support to the GBP.
COVID-19 Pandemic Effects on Exchange Rates
Volatility increases in FOREX markets because of the pandemic. Ordinarily, USD, EUR, CHF, and JPY are more likely to move higher, while commodity currencies like GBP, AUD, ZAR, and CAD are likely to fall.
Presently, in AUD, the exchange rate is falling back to the distress in commodity currencies like GBP.
Will the GBP Get Stronger This Week?
It is improbable. The majority of banks’ forecasts said that GBP/AUD would carry on around 1.8145/1.8150 exchange rates. And, is expected to move a touch higher by the end of the year.
5 Reasons the GBP Will Weaken More Than Expected
- The Britain economy, imports/exports, industry, energy, mining, and manufacturing, have been impacted by the COVID-19 pandemic.
- As the UK’s economy slows down, GBP’s demand for imports lowers.
- Devaluation of GBP because of the early cut in the interest rates by the Reserve Bank of the country.
- Inflation and economic growths of countries outside the UK, flourishing the chance of reduced interest rates elsewhere.
- The US Federal Reserve increased the interest rates of USD during the normalization process of the pandemic.
Factors that Affect GBP Exchange Rate
1. The Economy of the United Kingdom
The domestic economic status of a country can lead to a stronger or weaker exchange rate. As the country battles the pressure brought by the pandemic, the exchange rate is likely to get weaker. Moreover, the global environment could also impact the economy of a country, negatively or positively.
The political scene and demarche in the UK can generate uncertainty. The higher it is, the worse the result to the GBP. Specifically, the government policies if deemed ineffective or unable to support economic growth.
3. Other Currencies
The US dollar (USD) has a significant influence on the GBP. Generally, when the USD gets higher, the GBP is relatively weaker, and another way around.