GBP/AUD Exchange Rate Strengthened by Dovish RBA
The Pound to Australian Dollar (GBP/AUD) exchange rate is on the rise this morning, in the wake of some dovish commentary from the Reserve Bank of Australia (RBA).
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7967, up roughly 0.3% from this morning’s opening rate.
Australian Dollar (AUD) Slumps Following RBA Meeting
The Australian Dollar (AUD) finds itself on the defensive today after the Reserve Bank of Australia struck a dovish tone following its February policy meeting.
As expected, the RBA opted to leave interest rates on hold at a record low of 0.1% this month.
However, the central bank surprised markets by announcing it would be expanding its quantitative easing programme by AU$100bn a month.
Most investors had expected the RBA to wait until at least March before adjusting its QE, with the early intervention a clear dovish sign.
In addition, RBA Governor Philip Lowe put more pressure on AUD exchange rates as he noted that the path to recovery looks ‘bumpy and uneven’, in spite of vaccines helping to improve the outlook.
Lowe, said:
‘The outlook for the global economy has improved over recent months due to the development of vaccines. While the path ahead is likely to remain bumpy and uneven, there are better prospects for a sustained recovery than there were a few months ago.
‘That recovery, however, remains dependent on the health situation and on significant fiscal and monetary support. Inflation remains low and below central bank targets.’
Adding to the Australian Dollar’s woes today were also comments from Australian Prime Minister Scott Morrison, who poured cold water on any hopes for additional fiscal stimulus. Telling the National Press Club, ‘you can’t run the Australian economy on taxpayers’ money forever’.
Pound (GBP) Firms as Coronavirus Cases Continue to Drop
At the same time, the Pound (GBP) is ticking higher this morning, with the currency finding support from the UK’s steady fall in new coronavirus cases.
Adding to the buoyant mood towards Sterling is the UK’s continued success with its vaccination programme, with over 13% of adults having reportedly received their first dose.
This is ultimately stoking speculation that the government could start easing the national lockdown, with is the main factor underpinning GBP exchange rates.
GBP/AUD Exchange Rate Forecast: BoE Rate Decision in the Spotlight
Looking ahead, the conclusion of the Bank of England’s (BoE) first policy meeting of 2021 looks to be the main catalyst in the Pound to Australian Dollar exchange rate later this week.
No policy changes are expected from the BoE this month, but we could see Sterling strengthen if policymakers signal that negative interest rates are off the table.
Meanwhile, the focus for AUD investors looks to be on Australia’s upcoming trade figures. Will a narrowing of the country’s trade surplus put more pressure on the ‘Aussie’ in the latter half of the week?