Pound to Australian Dollar Exchange Rate Struggles to Advance despite UK Stimulus
With both currencies boosted by stimulus yet throttled by coronavirus jitters, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate’s movement has been limited in recent sessions. Investors continue to anxiously await developments in the coronavirus outbreak.
The Australian Dollar (AUD) continues to be hit hardest by the market’s risk-aversion. As a result, GBP/AUD has sustained some gains this week.
GBP/AUD quickly advanced from the opening interbank rate of 1.96 and touched a post-2016 best of 2.02 at the beginning of the week. However, GBP/AUD quickly fell back into the interbank region of 1.98 and has been trending in that region since.
The Pound (GBP) found some support in UK stimulus news yesterday, while the Australian Dollar (AUD) found support in stimulus from Australia’s government. However, the worsening coronavirus pandemic is keeping investors concerned about both economic outlooks.
Pound (GBP) Exchange Rates Fail to Capitalise on Government and Bank of England Stimulus
Investors briefly bought the Pound (GBP) yesterday. The movement was in reaction to new stimulus measures.
As markets anticipated, the UK government introduced a boost in spending and fiscal stimulus during its 2020 Budget presentation yesterday.
On top of this, the Bank of England (BoE) announced an emergency interest rate cut. It was a 50 basis point cut, to 0.25%.
The coordinated double-whammy of stimulus boosted hopes for Britain’s economy to weather the worsening coronavirus pandemic. However, as the global situation worsened, the Pound ultimately failed to capitalise on the stimulus news.
The Pound fell as the World Health Organisation (WHO) declared a pandemic.US President Donald Trump’s announcement of a travel ban between the US and many EU countries. also weighed.
Australian Dollar (AUD) Exchange Rates Remain Unappealing despite Australia Stimulus
GBP/AUD has been struggling to advance much further. Overall though, the Australian Dollar (AUD) is the weaker of the two currencies today.
As a currency correlated to market risk and trade-sentiment, AUD continues to be battered particularly hard by the coronavirus outbreak
With the outbreak now being called a pandemic, fears of its impact on the global economy are rising. This is keeping the Australian Dollar among the market’s least-appealing major currencies.
The ‘Aussie’ only found limited support from news that Australia’s government was ramping up stimulus to protect the economy
Analysts say this is because Reserve Bank of Australia (RBA) is expected to keep easing monetary policy. On top of this, Australia is still likely to see a recession this year. According to Analysts from Westpac:
‘The federal government’s fiscal package is bolder than seemed likely just days ago, with the cash payments likely to be key to stemming the contraction in Q2 GDP. But a ‘technical’ recession is still likely and QE talk is picking up – including by the RBA itself.’
Pound to Australian Dollar (GBP/AUD) Exchange Rate Dominated by Coronavirus Outlook
The Pound to Australian Dollar (GBP/AUD) exchange rate remains volatile and jittery. This week’s stimulus news has had little perceived impact on stability as coronavirus concerns dominate.
It’s likely that developments in the spread will dominate movements in both currencies.
Britain is expected to ramp up measures to limit Covid-19’s spread. If these measures go well, the Pound (GBP) could find a little stronger support. However, a rising outbreak would have the opposite effect.
The Australian Dollar (AUD), on the other hand, will remain sensitive to market trade sentiment. If the number of new cases in some countries slows slightly, the Australian Dollar could find some more support.
Next week will see the publication of the Reserve Bank of Australia’s (RBA) latest meeting minutes results. If the RBA’s stance is even more dovish than expected, the Pound to Australian Dollar (GBP/AUD) exchange rate could see slightly stronger demand.