GBP/AUD is surging on Thursday after the Reserve Bank of Australia (RBA) cut the interest rate to a record low at 0.25%.
Currently, the pair is trading at 2.0384, up 1.33% as of 6:20 AM UTC. Earlier today, the price hit a daily peak at 2.070, which is the highest level since January 2016.
RBA Cuts Cash Rate, Launches QE
Australia’s central bank took unprecedented measures to fight the impact of the coronavirus pandemic. The RBA cut its interest rate to a new record low at 0.25%, from 0.50%. Most analysts expected this move.
Besides lower rates, the central bank also deployed quantitative easing for the first time. The bank said it would purchase government bonds in an effort to keep three-year yields around 0.25%.
RBA Governor Philip Lowe said that the board wouldn’t increase the cash rate until inflation maintains within the 2-3% target band. He added:
“At some point, the virus will be contained and the Australian economy will recover. In the interim, a priority for the Reserve Bank is to support jobs, incomes and businesses, so that when the health crisis recedes, the country is well placed to recover strongly.”
Elsewhere, the Australian Bureau of Statistics (ABS) said that the country’s unemployment rate surprisingly declined last month to 5.1% from 5.3%, while analysts expected a flat reading.
Employment surged 26,700 in February, while economists anticipated a modest gain of a 6,300.
The ABS noted in its report that there was no evident impact from one of the worst fire seasons or the coronavirus outbreak. However, the agency added that “the February reference period was in the first half of the month and pre-dates the notable increases in confirmed cases in Australia of COVID-19.”
The positive labor market data couldn’t help the Aussie since investors focused on the RBA’s decisions.
After the RBA meeting, Lowe said that the bank was anticipating significant job losses. The scale of these losses will be impacted by the ability of local companies to convince workers to stay during this difficult period. He stated:
“We are clearly living in extraordinary and challenging times.”
The Aussie is squeezed by bears, as it cannot recover against a weakening pound, which fell against the US dollar to the lowest level since 1985.
