GBP/AUD: Aussie Rises in Concert with Kiwi after RBNZ

The British pound is lower against the Australian dollar on Wednesday afternoon. The Aussie is higher in concert with the New Zealand dollar after the Reserve Bank of New Zealand opted to keep interest rates steady. The revelation that the number of new cases of the coronavirus is slowing is also helping Asia-Pacific currencies.

GBP/AUD was down by 59 pips (-0.30%) to 1.9229 with a daily price range of 1.9214 to 1.9306 as of 2.30pm GMT. A failure to push beyond 1.93 on Tuesday saw the currency pair turn lower again on Wednesday before stalling at 1.922. The daily losses add to a weekly decline of -0.44%.

AUD and NZD high as RBNZ left monetary policy unchanged

Given the historic linkages and close trade ties between Australia and New Zealand, the two currencies tend to correlate. The New Zealand dollar saw its biggest daily price of the year after the Reserve Bank of New Zealand left monetary policy unchanged and took a more hawkish view on the New Zealand economy than had been expected. Interest rates in New Zealand will remain steady at 1%, twenty-five basis points higher than the 0.75% benchmark rate in Australia.

Both counties face a similar risk from the coronavirus but both the RBA and now the RBNZ have taken a wait-and-see approach on their monetary policy response to any negative economic effects. Central bankers have highlighted the external economic risks but tempered that with confidence in the durability of the domestic New Zealand and Australian economies.

Growing fiscal optimism should boost GBP

A comeback in the British pound this week is being supported by growing evidence of a fiscal boost coming to the United Kingdom this year. This contrasts with a certain reluctance from the government in Australia to use the low interest rate environment to its advantage, despite vocal calls to do so from the RBA

The approval of HS2, the high-speed rail line connecting London to Birmingham at a whopping cost of over £100B is being taken as a sign the Boris Johnson government will loosen its purse strings to improve UK infrastructure and sure up the economy against any Brexit uncertainty. Further spending measures are set to be announced on March 11, the date of the next budget.

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