The British pound is lower against the Australian dollar on Monday.
- Australian interest rates remain unchanged
- RBA says possible depth of Australia downturn will be less than expected
- China foreign ministry says no information on halt in soybean purchases
- US dollar declines; AUD/USD reaches for 0.70
GBP/AUD was down by 140 pips (-0.76%) to 1.8235 as of 4pm GMT.
The currency pair moved from range-bound action around 0.84 to plumbing new depths to its lowest in nearly 8-months. Yesterday the exchange rate fell 0.75%, bringing about a -1.5% drop in two days.
GBP: China will continue US soybean purchases
The Australian dollar continues to benefit more than the pound from improving investor sentiment, especially with the possibility of US-China tensions spilling over into a trade war seemingly starting to fade. Meanwhile Sterling has become a serial loser against the Aussie as EU/UK post-Brexit trade talks have stalled.
Risk sentiment was supported by news from China that it would be continuing its US soybean purchases, as agreed in the phase one trade deal with the United States. Rumours had been floating around yesterday that China had ordered state-owned companies to freeze orders of US agricultural products.
AUD: Interest rates and yield targets on hold
The decision to keep interest rates and the 3-year yield target at 0.25% was as expected. What was less expected was the official statement turning a little brighter on the economic outlooks.
The RBA official statement released with its decision read as follows:
“…it is possible that the depth of the downturn will be less than earlier expected. The rate of new infections has declined significantly and some restrictions have been eased earlier than was previously thought likely…. It is likely that this fiscal and monetary support will be required for some time.”
A key to the sharp recovery in the Aussie dollar in the past two months has been its handling of the pandemic, which limited the economic damage- as well as new levels of government and central bank stimulus, which look like remaining in place for the foreseeable future.
