GBP-SEK money

The British pound is lower against the Australian dollar on Wednesday.

  • OECD puts UK at bottom of the list on 2020 growth
  • UK economy forecast to contract -11.5 this year
  • Global markets pause before Fed Meeting
  • Pound-Aussie exchange rate is higher by +0.23% this week

GBP/AUD was down by 67 pips (-0.36%) to 1.8215 as of 4pm GMT.

The currency pair made a brief trip above 1.83 before turning lower and stabilising near 1.82 and its low of the day. Yesterday the exchange rate rose +0.90%.

GBP: OECD predicts biggest growth drop in UK

On Wednesday the Paris-based Organisation de coopération et de développement économiques (OECD) forecast the UK economy would contract -11.5% this year, possibly extending to -14% if there is a second wave of the coronavirus pandemic.

The OECD made forecasts for all ‘G20’ economies and the UK was the bottom of the list under what it referred to as the ‘single hit’ scenario where there was only one wave of the virus. Under a ‘double hit’ scenario – the UK could fall -14%, just behind France at -14.1%.

The dire OECD predictions dragged on investor optimism and pulled the pound lower in the process, in a retracement of the strong gains made on Tuesday.

AUD: Aussie outperforms in Fed lead-up

The British pound and the Australian dollar both tend to fare well during periods of economic expansion, but the near 50,000 deaths in the UK from the coronavirus compared to 102 in Australia has been the difference-maker in investors expectations for the speed of the recovery.

The US Federal Reserve will set US interest rates at 2pm EST. Traders are sitting on their hands before what could be a potentially huge moment for the direction of so-called ‘risk-assets’ of which the Australian dollar has been prominent in the last few weeks.

Amid hopes for a quick economic recovery, bond yield have been rising alongside stock markets. This is a dilemma the Fed will try to tackle because higher yields make the cost of borrowing for individuals and companies higher in the United States, potentially dragging on the economic recovery.