Pound Australian Dollar (GBP/AUD) Exchange Rate Slides as BoE Willing to Take Further Action

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Falls as BoE Warns of ‘Longer-Term Damage’

UPDATE: The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped, leaving the paring trading at around AU$1.9896.

The Pound slumped against the ‘Aussie’ after the Bank of England (BoE) left interest rates unchanged during its scheduled monetary policy meeting.

Policymakers said they were willing to take further action to limit the economic damage from Covid-19 if required.

Today’s meeting followed two previous emergency meetings which resulted in rates being slashed twice. The bank also ramped up its bond buying programme.

In the minutes, the BoE said:

‘The spread of the disease and the measures that are likely to be needed to contain it have evolved significantly. The economic consequences of these developments are becoming more apparent and a very sharp reduction in activity is likely. Given the severity of that disruption, there is a risk of longer-term damage to the economy, especially if there are business failures on a large scale or significant increases in unemployment.’

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Muted as Traders Avoid Excessive Risk

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate remained flat this morning, leaving the paring trading at around AU$2.0029.

The British currency remained under pressure as investors continued to fret the country was not prepared to deal with the increase in Covid-19 cases.

Meanwhile, the risk-sensitive Australian Dollar remained under pressure as traders avoided taking excessive risks.

Markets now await the passage of a $2 trillion US stimulus bill to help offset the economic damage of the pandemic. However, there are some indications some US states will need more money in order to cope with the spread of coronavirus.

Risk sentiment slipped as markets now expect US weekly jobless claims to jump by around one million. This is well above the last peak seen during the global financial crisis.

According to Tohru Sasaki, head of Japan markets research at JP Morgan Securities in Tokyo:

‘It could be difficult for the markets to digest weekly jobless claims.

‘Bad numbers are expected and priced into a certain extent, but there are people who think things will get even worse. In the end this may support the Dollar as investors choose to bring their money home.’

Worst Retail Sales Since 2013 Leaves the Pound (GBP) Flat

Sterling remained under pressure today after data revealed UK retail sales did not show growth in February.

This was the weakest performance since 2013, and before what is expected to be the largest decline in sales on record due to coronavirus restrictions.

The Office for National Statistics (ONS) showed sales last month were flat after 0.9% growth just a month earlier.

Month-on-month, sales slumped by -0.3%, and excluding fuel this figure jumped to -0.5%.

Commenting on this, ONS statistician Rhian Murphy said:

‘Retail sales continued to decline in the latest three months due to weak sales across most store types, with February’s bad weather and flooding impacting on footfall.

‘A small number of retailers also said that the impact of the coronavirus had affected sales of goods shipped from China.’

Pound Australian Dollar Outlook: Bank of England (BoE) in Focus

The Pound (GBP) could edge higher against the Australian Dollar (AUD) following the Bank of England’s (BoE) interest rate decision.

While the BoE is expected to leave rates at the current historic low, if policymakers unveil further economic stimulus to help combat the economic effects of the coronavirus pandemic, Sterling could rise.

Meanwhile, the main catalyst for movement of the pairing will continue to be the coronavirus pandemic.

If traders begin to flock back to safety as the death toll continues to rise, the risk-sensitive ‘Aussie’ will fall. This would cause the Pound Australian Dollar (GBP/AUD) to edge higher.

Millie Empson

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