GBP/AUD has consolidated above 2.000 on Wednesday, after trading below it yesterday. Currently, one British pound buys 2.0318 Australian dollars, up 0.41% as of 7:15. The larger timeframes show that the pair continues to follow a long-term uptrend that started in August last year.
As of today, there is a general aversion for risk currencies, including the Aussie. Besides, the Reserve Bank of Australia (RBA) was worried about a “very material contraction” in economic activity when it decided to launch the quantitative easing programme, according to recent minutes of the emergency meeting.
The central bank held a meeting on March 18 when it cut the interest rate to a new record low at 0.25%.
While the RBA couldn’t provide an updated outlook for the economy, the bank said that “it was likely that Australia would experience a very material contraction in economic activity, which would spread across the March and June quarters and potentially longer.”
Australian Manufacturing Saw Record Decline in Output
Australia has reported over 4,500 COVID cases and 20 deaths. The government has imposed several social distancing measures that already affect the economy. Recently, IHS Markit released Australia’s manufacturing purchasing managers index (PMI), which fell last month to 49.7 from 50.2 in February. The 50 mark separates growth from contractions.
The research firm said that manufacturing conditions worsened in March, as the industry saw a record decline in output and new orders. Companies reduced hiring, purchasing activity and inventories, as many of them were worried about production halts.
Supply chains were hit by import restrictions and other anti-COVID measures.
The Markit report reads:
“Firms highlighted that the COVID-19 outbreak had dampened demand, as well as reports of bushfires limiting sales. The downturn in sales led firms to cut back further on production. Output fell for a seventh straight month and at the quickest rate since the survey started in May 2016.”
The pound has managed to dominate the pair even though it has reported way more cases than Australia. Yesterday, the UK saw the highest number of COVID-related deaths in a single day. The death toll rose 27% to 1,789. Prime Minister Boris Johnson has also tested positive and is in self-isolation.