GBP/AUD Exchange Rate Firms as BoE Injects Additional £150bn into the UK Economy

GBP/AUD Exchange Rate Buoyed by BoE Stimulus Announcement

After slumping to a two-week low overnight, the Pound to Australian Dollar (GBP/AUD) exchange rate appears to have steadied this morning following the Bank of England’s (BoE) new stimulus announcement.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8092, up almost 0.3% from this morning’s opening rate.

Pound (GBP) Underpinned by BoE’s QE Announcement

The Pound (GBP) is trending higher against the majority of its peers this morning, as the currency receives support from the Bank of England’s new stimulus measures.

Following the conclusion of its November policy meeting, the BoE announced this morning that it would be expanding its quantitative easing programme by £150bn in an effort to help shield the UK economy from the impact of the coronavirus pandemic.

This was larger than the £100bn expansion which had been forecast by economists and likely reflects the deterioration of the BoE’s short-term outlook due to the resurgence of the coronavirus and new restrictions in the UK.

While GBP investors welcomed the extra support for the UK economy, the upside in the Pound was capped by some bleak forecasts for the fourth quarter.

The BoE’s policy statement read:

‘Informed by recent movements in high-frequency indicators of activity and announcements about Covid-related restrictions, UK GDP is projected to fall in Q4.

‘That largely reflects lower consumer spending on social activities, which is assumed to be partially offset by higher spending on other goods and services.’

However, the BoE was more positive in regards to unemployment, with the bank now predicting unemployment will peak at 6.25% in Q4, down from forecasts of 7.5% three months ago.

Australian Dollar (AUD) Muted as US Election Result Hangs in Balance

At the same time, the Australian Dollar (AUD) is mostly flat this morning as investors remain reluctant to make any aggressive bets on the risk-sensitive currency as we continue to wait for the result of the US presidential election.

While Biden looks to have the easier path to victory, the result remains extremely close, and with Trump threatening legal action should he lose, fears of a contested result remain high.

Further limiting movement in the ‘Aussie’ this morning was the publication of Australia’s latest trade figures, which revealed a worrying slump in exports in September.

GBP/AUD Exchange Rate Forecast: UK Furlough Scheme to Be Extended Past December?

Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate may have more room to rally today, as Chancellor Rishi Sunak is due to outline additional support measures later this afternoon.

Sunak is expected to announce an extension to the government’s furlough scheme through December and beyond, with the job protection scheme to be made available to businesses operating under the highest level of coronavirus restriction, once the current lockdown expires.

Meanwhile, AUD investors will be paying close attention to the publication of the Reserve Bank of Australia’s (RBA) latest monetary policy statement later tonight, as they look to discern whether the RBA’s latest rate cut may precede more easing efforts.

Matthew Andrews

Contact Matthew Andrews