- RBA keeps rates on hold at 0.25%
- Australian Dollar (AUD) rises as Dr Lowe sees downturn as less severe than originally expected
- Pound (GBP) broadly stronger on Brexit optimism
- At 09:15 UTC, GBP/AUD is trading -0.1% at 1.8348
The Australian Dollar is gaining ground against the Pound on Tuesday, after rallying 0.9% in the previous session. The Australian Dollar settled on Monday at 1.8379 after hitting a fresh 7 month high.
At 09:25 UTCM, GBP/AUD is trading -0.1% at 1.8348. This is at the lower end of the daily traded range of 1.8340 – 1.8458 following the Reserve Bank of Australia’s monetary policy meeting and as Brexit talks commence.
Australia’s central bank kept its interest rate on hold at 0.25% and monetary policy unchanged in it June meeting. The bank had sharply tapered bond buying in its May meeting as coronavirus cases dwindled and financial markets calmed.
RBA Governor, Dr Philip Lowe supported the Aussie Dollar by saying that the coronavirus crisis downturn will be less severe than originally expected. He highlighted that fiscal and monetary stimulus in Australia is aiding the economy through the crisis.
Supporting his views, a gauge of consumer confidence rose for a ninth straight week on Tuesday. The economic outlook has improved as infections decline and restrictions are eased. However, upcoming unemployment figures could drag on sentiment going forwards.
600,000 jobs were lost in April, yet the unemployment rate only increased to 6.2%. The RBA believe that this figure will reach 10% by the end of this month.
The Pound is trading broadly higher versus its peers, albeit lower the Aussie Dollar, amid growing Brexit optimism. The last round of Brexit talks prior to a key June Summit begin today. According to the Times newspaper, the British government is willing to compromise on UK fisheries, a small UK industry, and broader trading relations if Brussels is also ready to compromise.
Concessions from both parties is the surest way to a free trade deal being agreed. Without such a deal, the UK faces a hard, cliff edge Brexit at the end of the year just as businesses are trying to recover from the coronavirus crisis.
There is no high impacting UK data due for release today. Investors will keep a close eye on Brexit headlines.
