GBP/AUD is in free fall on Tuesday, flashing red for the fourth session in a row. Currently, the pair is trading at 1.9930, down 0.78% as of 7:10 AM UTC.
The sterling has extended its decline as UK Prime Minister Boris Johnson has been hospitalized after ten days of persistent COVID symptoms that don’t go away. Yesterday, he was moved to the intensive care unit, though it is not clear how serious his symptoms are.
Elsewhere, the Aussie has benefited from a boost in appetite for riskier assets as the markets hope the COVID pandemic is easing.
RBA Maintains Rate at Record Low
Earlier today, the Reserve Bank of Australia (RBA) maintained the interest rate at the record low of 0.25% and said that the unprecedented stimulus programme would continue.
Governor Philip Lowe commented:
“There is considerable uncertainty about the near-term outlook for the Australian economy. Much will depend on the success of the efforts to contain the virus and how long the social distancing measures need to remain in place.”
He admitted that a large economic contraction is expected in the three months to June and the unemployment rate is about to surge to the highest level in many years.
In fact, separate data from Australia and New Zealand Banking Group showed that job advertisements have already seen the largest decline in over a decade in March.
Earlier Tuesday, the Australian Industry Group (AIG) said that its services index tumbled to 38.7 points last month, the lowest in 11 years.
However, investors mostly ignored this bearish data as it has been already priced in. Instead, the Aussie was boosted by the central bank’s hints that it would slow the purchase of bonds.
Also, Lowe said that there were “some signs that markets are working more effectively than they were a few weeks ago, which partly reflects the substantial measures undertaken by central banks”.
He added that the coordinated monetary response, along with complementary measures implemented by local banks, would soften the economic contraction.