Pound Australian Dollar (GBP/AUD) Exchange Rate Retreats from Four-Year High as RBA Slashes Rates to Record Low

GBP/AUD Exchange Rate Rangebound Following RBA Rate Cut

The Pound to Australian Dollar (GBP/AUD) exchange rate is holding steady this morning as markets digest the Reserve Bank of Australia’s (RBA) emergency rate cut.

At the time of writing the GBP/AUD exchange rate is trading at around AU$2.0232, having struck as high as AU$2.078 earlier in the session.

Australian Dollar (AUD) Buoyed by RBA’s Emergency Measures

The Australian Dollar (AUD) found some support during today’s Asian session after the RBA took steps to try and protect the Australian economy from the fallout of the coronavirus.

Following an emergency policy meeting the RBA announced it would be slashing interest rates for a second time this month, cutting them to a new record low of 0.25%.

The cut comes as the disruption caused by the coronavirus looks to set to plunge much of the world into a recession.

In announcing the move, RBA Governor Phillip Lowe said:

‘The coronavirus is first and foremost a public health issue, but it is also having a very major impact on the economy and the financial system.

‘At some point, the virus will be contained and the Australian economy will recover. In the interim, a priority for the Reserve Bank is to support jobs, incomes and businesses, so that when the health crisis recedes, the country is well placed to recover strongly.’

The move was cheered by AUD investors and helped the AUD/GBP exchange rate rally from a four-year low. But given the current risk-off mood in market a more substantial recovery in the Australian Dollar looks highly unlikely.

Pound (GBP) Subdued as UK Braces for More Stringent Coronavirus Measures

At the same time, while the Pound (GBP) remains well positioned against the Australian Dollar (AUD) this morning, in wider trade Sterling continues to struggle following a sharp sell-off on Wednesday.

This comes as the UK government prepares to step up its response to the coronavirus crisis, with Boris Johnson announcing in his daily briefing yesterday that all schools in the UK would close for an indefinite period from Friday.

GBP investors are also bracing for an expected lockdown of London in the coming days as the PM warned he is prepared to take ‘further and faster measures’ to halt the spread of the coronavirus.

As the heart of the UK’s vital financial services industry, the potential disruption cause to day-to-day life in London will do little to buoy confidence in GBP investors.

GBP/AUD Exchange Rate Forecast: More Coronavirus Chaos Ahead

Looking forward, with no end in sight for the coronavirus crisis it seems safe to assume that currency markets will remain highly volatile for the foreseeable future.

With a risk-off mood likely to prevail during this time it’s likely to result in the Pound to Australian Dollar (GBP/AUD) exchange rate maintaining an upward trajectory in the weeks to come.

Matthew Andrews

Contact Matthew Andrews