The British pound is higher against the Australian dollar on Tuesday with forex markets reacting favourably to an ‘unprecedented’ set of extra new measures announced by UK Treasury Secretary Rishi Sunak.
GBP/AUD was up by 174 pips (-0.12%) to 2.0225 with a daily range of 1.9912 to 2.0243 of 5pm GMT.
GBP/AUD has surged well beyond the key 2.00 figure which has set it on a path towards a return to last week’s peak near 2.07.
British pound up after government-backs £330 billion in loans
The British pound has jumped in a positive response to Chancellor Rishi Sunak announcing £330 billion in government-backed loans to support companies during a coronavirus-led downturn. The new measures also include a 3-month mortgage holiday for homeowners. The Bank of England worked with the Treasury in the latest set of measures to make sure the massive £330 billion is possible, however it did not announce any major new monetary stimulus measures like lower interest rates.
The new polices comes as the UK reported 407 new coronavirus cases in the past 24 hours, a rise of 26% bringing the new total to 1,950. Sir Patrick Vallance, the government’s chief scientific advisor has said the true number of cases could already be 55,000. The UK Foreign office has advised against all non-essential travel for the next 30 days.
Australian dollar dropping on rate cut speculation
Meanwhile, minutes from last Reserve Bank of Australia (RBA) meeting in March showed that the central bank is ready to ease its policy further after lowering its interest rate to a record low of 0.5%. Many central banks are resorting to ‘emergency rate cuts’ in between meetings because the situation with the COVID-19 outbreak is so fast-moving. The minutes could even be called stale because the RBA is now reportedly gearing up to announce its first quantitative easing program which was not even mentioned by policymakers according to the minutes.
Expectations for weaker monetary policy, falling commodity prices, now including gold and a proxy for the global economy are all weighing on the Aussie dollar.
