GBP/AUD has continued to decline on Friday, after two bearish sessions in a row. Currently, the pair is trading at 1.9973, down 0.11% as of 7.35 AM UTC.
Bank of England Cuts Rate to Record Low at 0.1%
Yesterday, the Bank of England (BoE) cut its interest rate from 0.25% to 0.1%, which is a record low. The central bank’s Monetary Policy Committee (MPC) backed the move unanimously “to meet the needs of UK businesses and households in dealing with the associated economic disruption.”
Last week, the BoE slashed the rate from 0.75% to 0.25%.
Besides the rate cut, the central bank pledged to purchase bonds worth 200 billion pounds to stimulate the British economy amid the coronavirus outbreak.
On Thursday, the UK government confirmed another 33 deaths caused by the virus, bringing the death toll to 137. All victims had underlying health conditions. The total number of infected people was at 3,269.
The 200 billion pound increase took the central bank’s total asset purchase program to 645 billion pounds, which is 9% of the country’s gross domestic product (GDP). This is even bigger than the European Central Bank’s similar plan, whose size is 6% of the eurozone’s output.
UK Prime Minister Boris Johnson and finance minister Rishi Sunak will talk later today about another package of measures to support the economy. At this time the program is aimed at people in work. Earlier this week, the government announced a package of 350 billion pounds to support businesses.
Economists welcomed the BoE and UK government’s moves. Still, the sterling has been weakening this week as investors rushed to buy US dollar to preserve their savings amid the upcoming global recession.
Nomura economist George Buckley commented on the stimulus efforts:
“There can be no question that the monetary and fiscal authorities are throwing everything they can at this problem to support firms and households, cushion demand as much as is reasonably possible, and to reduce the long-term hit to supply.”
The Aussie has been stronger in recent days as the number of new COVID-19 cases in China and South Korea are significantly declining. However, Australia itself report 50 new cases yesterday, which is the biggest daily jump in cases.
Oil prices are bouncing back to the $30 level, supporting trade-reliant economies like Australia.