The currency pair is swiftly unwinding gains from late last week which now look like a short-term relief rally in the pound.
The Sterling – Aussie cross has been range-bound near the 2.00 level with both currencies pressured by risk-off moves in the market and by the announcement of new QE programs by the respective central banks last week.
GBP/AUD was down by 214 pips (-1.07%) to 1.9859 with a daily range of 1.9841 to 2.0360 as of 4.30pm GMT.
The currency pair started the day with a positive tone, trading as high as 2.03 but then turned underneath the 2.00 midpoint to hit 1.985. Last week the exchange rate gained 1.11%.
British pound lower as BOE buys gilts
US futures started the day limit down 5%, surged on the news of new Fed easing measures and then slid as the number of virus cases jumped in New York.
Markets are still judging the economic support package announced by UK Chancellor Rishi Sunak last Friday. It includes an unprecedented plan to pay 80% of staff wages up to £2500 to businesses affected by the coronavirus.
The measures come ahead of an expected ‘full lockdown’ where many companies will be left without any customers in a forced shutdown of non-essential businesses.
Australian dollar rebound capped by QE
The Aussie benefitted from weakness in both the US dollar and Sterling on Monday but gains were capped by fragile market sentiment. The overall trend still looks to be lower in the Australian currency because of the risks the coronavirus poses to Australia and global trade.
Australia’s state governments imposed new local lockdown measures on Sunday, closing off inter-state travel. The National government had already announced the closure of pubs and restaurants.
A major increase in fiscal spending is apparently on the way but has not as yet materialised so while that remains the case, chances are that the Reserve Bank of Australia will have to fill the void with more monetary easing which stands to weaken the Aussie.