Pound Australian Dollar (GBP/AUD) Exchange Rate Dips Following Emergency BoE Rate Cut

GBP/AUD Exchange Rate Slips as Markets Brace for the UK Budget Announcement

The Pound Australian Dollar (GBP/AUD) exchange rate dipped this morning, with the pairing currently trading around AU$1.984. The Bank of England’s (BoE) monetary policy committee voted unanimously in an emergency meeting to cut the banks interest rate from 0.75% to 0.25%.

The BoE said in its statement:

‘Although the disruption arising from Covid-19 could be sharp and large, it should be temporary. The Bank of England’s role is to help UK businesses and households manage through an economic shock. These measures will help to keep firms in business and people in jobs and help prevent a temporary disruption from causing longer-lasting economic harm.’

Sterling traders are remaining poised for Chancellor Rishi Sunak’s announcement of the Budget for the next five years. With the Bank and the Treasury appearing to work together to ward off Covid-19’s negative impact on the British economy, some of the Pound’s losses from the BoE’s rate cut have been held back.

Kallum Pickering, Senior Economist at Berenberg Bank, commented on the Budget.

‘The joint action reflects the intention to send a big message that policymakers are prepared to take aggressive and pre-emptive steps to support the economy.’

Australian Dollar (AUD) Exchange Rate Edges Higher as China’s Economy Shows Signs of Recovery

The Australian Dollar (AUD) edged higher following the release of Australia’s Home Loans report for January, which beat forecasts and rose by 3.1%. Today also saw Australia’s investment lending for homes in January edge higher at 3.6%.

The AUD/GBB exchange rate has also benefited from a return of risk appetite as the Chinese economy is showing signs of recovery following Wuhan’s coronavirus outbreak.

Kelvin Tay, the Chief Investment Officer at UBS Global Wealth Management, said that China’s coronavirus situation may have ‘passed its worst’ with a ‘semblance that production capability is actually now coming back to the Chinese economy.’

However, the ‘Aussie’s gains are likely to be short-lived as Australia’s stock market has taken a dive after the nation’s coronavirus cases have risen to 122.

The global credit rating agency Standard & Poor’s were upbeat in their analysis of the Australian economy going forward, however, saying:

‘Although COVID-19 is hitting the Australian economy and government finances, rating stability is anchored in our expectation that the global outbreak will subside during the second quarter of 2020 and that the economy will bounce back shortly after.’

GBP/AUD Forecast: Could Sterling Benefit from Spring Budget 2020?

Australian Dollar (AUD) investors will be looking ahead to tomorrow’s release of March’s Australian Consumer Inflation Expectations report. With the gauge expected to rise from 4% to 4.6%, we could see the ‘Aussie’ rise as its economic outlook improves.

Sterling traders will continue to monitor the UK’s coronavirus situation. However, if the Budget cushions the economy against the negative effects of the virus we could see the GBP/AUD exchange rate begin to edge higher towards the end of this week.

David Moore

Contact David Moore

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