GBP/AUD: Market prediction of UK rate cut in March spikes

The British pound was substantially lower against the Australian dollar on Monday following yet another strong hint from the Bank of England that more monetary easing might be in the pipeline to support the British economy should the coronavirus crisis worsen.

Meanwhile a lower daily rise in cases in China was offering some support to the Aussie dollar.

GBP/AUD was down by 259 pips (-1.31%) to 1.9504 with a daily price range of 1.944 to 1.98 as of 3pm GMT.

GBP to AUD is down 300 pips from Friday’s peak and is now making new 1-week lows beneath 1.95. Last week the exchange rate rose 0.63% for a third consecutive weekly rise.

GBP/AUD: Pound facing big losses across most G10 currencies

The British pound is seeing big losses across most G10 currencies in reaction to the likely interest rate cut from the Bank of England at its March meeting. Expectations for the monetary stimulus jumped after Governor Mark Carney has said the Bank of England is working with HM Treasury and Financial Conduct authority (FCA) to make sure “all necessary steps are taken” in response to the coronavirus. UK policymakers look set to intervene after the worst fall in share prices since the 2008 financial crisis last week.

The Australian dollar

Traders are looking ahead to the Reserve Bank of Australia (RBA) interest rate decision tomorrow morning. There are now 33 cases of the coronavirus in Australia and policymakers fear the numbers are set to rise, curtailing domestic economic activity. That is in addition to China, Australia’s number one trading partner coming to a near standstill as it tries to contain the outbreak. Financial futures markets are pricing a near certainty that the central bank cuts interest rates. Additionally, Australian Treasurer Josh Frydenberg reiterated that the government’s fiscal response would be “responsible, considered and targeted.”

Data released overnight by Australia was more upbeat but from China it was about as bad as it gets. The Commonwealth Bank Manufacturing PMI moved into expansion territory to 50.2 from 49.8 in January. But the Chinse Caixin Manufacturing PMI fell to a record low of 40.3.

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