GBP/AUD: Pair Bounces Back from Yesterday’s Crash

GBP/AUD is actively moving upwards in early trading on Friday, though it crashed yesterday after the Bank of England (BoE) released its interest rate decision. The pair is trading now at 1.8621, up 0.26% as of 5:43 AM UTC.

Despite today’s spike, the price continues to move inside a bearish trend that started in mid-October.

Bank of England Maintains Interest Rate

On Thursday, the BoE left the interest rates unchanged, in line with analysts’ expectations. However, investors were surprised by two officials who voted for a cut to revive the economic slowdown. Moreover, Governor Mark Carney admitted the central bank would consider a reduction if Brexit uncertainty doesn’t ease.

Economists expected the BoE’s Monetary Policy Committee to vote unanimously to keep the rates. The announcement of the 7 to 2 vote put pressure on the British pound. It declined to the lowest level in three weeks against the Aussie. Now the probability for a rate cut next year increased to 80%.

The UK’s central bank has not followed the US Fed and the European Central Bank in reducing rates. Though, yesterday it turned to a dovish stance.

Carney said that the bank would stick to gradual rate hikes only if the global economic slowdown stabilizes. And also if Prime Minister Boris Johnson’s deal manages to take the UK out of the European bloc. However, if this scenario goes wrong and the outlook deteriorates, Carney admitted a rate cut is close. He commented:

“These are pretty big tectonic forces operating right now. If global growth fails to stabilize or if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in UK GDP growth.”

Reserve Bank of Australia Open to More Cuts

The British pound bounced back against its Australian counterpart after the Reserve Bank of Australia (RBA) released its latest statement with an updated outlook.

The central bank turned dovish on wage growth and said it was open to even lower interest rates. Australian workers should be ready for a period of zero income growth that will extend to the next election.

RBA downgraded a series of forecasts related to economic growth, consumption, wages, and housing investment.

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