The British pound was lower against the Australian dollar on Wednesday with the Aussie continuing to make big strides after the decision to lower Australian interest rates and amid plan for a fiscal stimulus program in Australia.
GBP/AUD was down by 34 pips (-0.87%) to 1.9428 with a daily price range of 1.9290 to 1.9499 as of 4pm GMT. Early declines ended at 1.93 and a rebound fell short just before 1.95 and rolled over. GBP/AUD exchange rate has a weekly loss of -1.33%.
The British pound
UK economic data for February has been robust but markets are looking ahead to March, April and beyond where the rising number of coronavirus cases and the restriction in travel and business that might be necessary.
It is now almost a certainty that there will be a UK rate cut at the Bank of England meeting on March 26 if not sooner. With lower UK interest rates around the corner amid another big global downturn in yields, a rush into the safety of UK government bond markets saw the UK 10-year gilt yield fall to a record low.
The Australian dollar
Plans for fiscal stimulus to boost the monetary efforts already made are raising hopes for Australia’s ability to weather the economic storm caused by the coronavirus and the slowdown in China, the country’s biggest export market.
Australian Treasurer Frydenberg said the government in Sydney is working on “target fiscal measures” which could include a business investment allowance. Access to cheaper funding or a cash injection for areas of the economy most exposed to the virus outbreak. It should improve businesses and particularly Australian SMEs to avoid going out of business due to a short-term shock.
The Reserve Bank of Australia Deputy Governor Guy Debelle spoke to the Australian parliament about the decision to lower interest rates. Interestingly he said that the RBA only has one rate cut left in it before it must turn to quantitative easing (QE). He said the fall in services exports due to coronavirus would cut about 0.5% off Australian GDP in the first quarter of 2020.
