Pound to Australian Dollar Exchange Rate Fall Slows Ahead of Bank of England (BoE)
Update 16:53 BST 05/08/2020:
Investors were hesitant to keep selling the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate today. As investors await tomorrow’s key news, the pair’s movement slows.
The Bank of England (BoE) is not expected to make any changes to monetary policy tomorrow. Instead, it is the bank’s tone on controversial policy issues that will hold focus.
According to Yohay Elam, Analyst at FXStreet:
‘If the bank surprises by opening the door to setting negative rates – either by seeing one member voting for a cut or via a message from Bailey – Sterling could stumble. As long as it remains only a theoretical option, it will likely be ignored by traders.’
As for the Australian Dollar (AUD), its appeal softened. US data concerns investors. Meanwhile markets looked away from risk-correlated currencies. This is weighing on AUD this afternoon.
(Originally published 11:33 BST 05/08/2020)
Pound to Australian Dollar Exchange Rate Falls as Markets Await Bank of England (BoE)
The Pound (GBP) has been weakening since yesterday, so the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has been falling. The Australian Dollar (AUD) is also weakening amid Australian coronavirus jitters.
GBP/AUD has seemed unable to hold last week’s impressive gains. GBP/AUD opened last week at the interbank level of 1.80 and surged higher on a combination of factors. Ultimately, GBP/AUD closed last week near the level of 1.83.
After briefly touching on a month and a half high earlier in the week, GBP/AUD began to tumble back yesterday. At the time of writing on Wednesday, GBP/AUD has lost around half of last week’s gains and trends in the interbank region of 1.81.
The pair may have fallen even further if not for Australian Dollar weakness. The Pound to Australian Dollar (GBP/AUD) exchange rate could also see a shift depending on tomorrow’s Bank of England (BoE) news.
Pound (GBP) Exchange Rates Hit by Job Concerns Ahead of Bank of England (BoE) Decision
Various factors continue to weigh over the Pound (GBP) outlook, even amid the currency’s surge in demand last week.
The Pound’s appeal has been dampened by concerns about Britain’s coronavirus situation and its impact on the economy. Uncertainties over Britain’s Brexit situation persist as well, of course.
Following last week’s surge, those weighing factors have been partially the cause of Sterling’s losses since yesterday. Pound investors are also anxious about tomorrow’s anticipated Bank of England (BoE) policy decision.
Today’s UK services PMI only added to the Pound’s concerns. While the data came in close to expectations, it indicated that the number of job losses in Britain was mounting.
According to Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply:
‘Employment fell even more quickly in July as some firms made redundancies in response to worries about the length of the recovery.’
Australian Dollar (AUD) Exchange Rate Bullishness Limited amid Victoria’s Coronavirus Crisis
The Australian Dollar (AUD) is a currency often correlated to market risk and trade-sentiment. As markets were initially happy with Australia’s handling of the pandemic, the ‘Aussie’ saw strong demand amid recovery hopes in recent months.
However, Australia’s outlook has become gloomier lately. Australia’s State of Victoria has seen a shock resurgence in cases, and the issue remains concerning even as the state sees fresh lockdown.
The Australian Dollar is benefitting from the Pound’s weakness today as well as some solid Chinese data. However, concerns over Victoria’s lockdown and the impact it could have on Australia’s economy are limiting ‘Aussie’ appeal.
Credit rating agency S&P has reportedly put Victoria’s AAA rating on negative watch. Concerns that the lockdown could even cause the state to see a credit rating downgrade has concerned investors.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Awaits Bank of England (BoE) Decision
This week’s key UK and Australian data has largely been published already. The data ultimately had little impact on the Pound to Australian Dollar (GBP/AUD) exchange rate, with movement being driven largely by coronavirus developments.
However, tomorrow’s Bank of England (BoE) policy decision is still the biggest event of this week’s economic calendar.
The BoE is not expected to announce any changes to monetary policy at this anticipated policy decision. However, the bank’s tone on Britain’s coronavirus outlook will be closely watched.
If the BoE signals that more policy easing is on the way, this could weigh on Sterling (GBP). If the bank so much as indicates that controversial measures like negative interest rates are on the table, the Pound could be hit especially hard.
As for the Australian Dollar (AUD), it will be driven by Australian coronavirus developments. Upcoming Australian services data on Friday may have a limited impact as well.
Overall, the Pound to Australian Dollar (GBP/AUD) exchange rate’s best chances of advancing are a more hawkish than expected Bank of England.