GBP/AUD continues to decline on Wednesday. Currently, the pound sterling and the Australian dollar are trading at 1.9784, down 0.26% as of 6:55 AM UTC.
BoE Cuts Rates Ahead of Schedule
The price tumbled after the Bank of England (BoE) surprised investors by cutting interest rates by 0.50% to 0.25% in an emergency move to stimulate the economy amid the coronavirus outbreak. The decision came hours earlier than planned. Thus, this was the first cut to occur outside the central bank’s normal schedule since the financial crisis in 2008.
The bank said:
“Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months.”
The BoE follows its Australian, Canadian, and US counterparts, while the European Central Bank is expected to ease its monetary policy tomorrow.
All members of the BoE’s Monetary Policy Committee (MPC) unanimously voted to cut the rate by 0.50%.
The bank maintained its target of bond purchases. However, it introduced a new scheme to support lending to small businesses. The BoE said in its statement:
“Temporary but significant disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households and for working capital from companies.”
Australia’s Consumer Sentiment Tumbles to 5-Year Low
Elsewhere, the Aussie is also struggling against other majors, as the country is assessing the impact of the coronavirus outbreak that originated in China, which is Australia’s largest trade partner.
Australian consumer sentiment fell to the lowest level in over five years in March. Melbourne Institute and Westpac Bank’s index of consumer sentiment dropped 3.8% this month and 7.0% year-on-year.
Westpac chief economist Bill Evans commented:
“The worsening coronavirus outbreak and associated rout in financial markets have had a major impact on sentiment this month. In fact, it is the second lowest level since the global financial crisis when the Index bottomed out at 79.”
The survey’s gauge of the economic outlook for the next 12 months tumbled 12.8%. Nevertheless, the outlook for the next five years fell only 1.3%.
Earlier today, Australia announced a $1.56 billion health package that will cover the development of fever clinics and cost-free facilities for people to get consulted over video calls.
