Last week saw GBP rise over the Australian dollar following the announcement of a hold on the cash rate from the Bank of England (BoE). This news allowed the pound to edge over AUD which was facing a decline amid a decline in the markets risk sentiment. The risk sentiment declined after fears of the spread of coronavirus. However, AUD looks to be on the recovery now as the markets risk sentiment appears to be recovering as positive signs of the coronavirus’s containment have made headlines. Furthermore, the RBA’s interest rate decision which was announced in the early hours of today saw the Reserve Bank of Australia keep its interest rate unchanged, which was predicted, but nonetheless reassures AUD investors.
AUD Looks to Be on the Road to Recovery as Coronavirus Jitters Ease Off
The Australian dollar has not had it easy over the past few weeks following the outbreak of the coronavirus. Due to the mass spread of the disease, the markets risk sentiment has been muted for a number of weeks as investors feared that the outbreak would have untold impacts on global trade performance and demand. As a risk-sensitive currency, AUD suffered losses as investors grew more concerned with the outlook for the Aussie dollar. However, reports are stating that the disease is set to peak in 10 to 14 days, following this there should be a decline in the severity of the outbreak. Zhong Nanshan, a respiratory scientist from China noted that the disease has been well contained, something that the market has observed and has seen the market sentiment loosen up in the past 24 hours. GBP has seen a recent slump as the UK enters negotiations with the EU over a Brexit trade deal. The talks have opened up the possibility of a no-deal Brexit again and this has negatively impacted the pound sterling.
RBA Decision Sees the Cash Rate Remain Steady as Predicted, Investors Are Relieved
Earlier this morning, the market saw the Reserve Bank of Australia (RBA) announce that it would keep its interest rate at 0.75%. This action was a popular forecast and thus sees AUD live to survive another day. But some are dubious about the AUD’s future, suggesting that tough times may be up ahead. Roberto Mialich, a strategist at UniCredit Bank in Milan, mentioned on Monday that he expected the central bank to hold rates, but any dovish or cautious tones from the bank will likely see AUD drop and the odds of a further cut in 2020 will rise. With the recent bushfires, the Aussie economy is likely to have been wounded and the RBA will be aware of this.
If you would like updates for GBP/AUD rates or have an upcoming currency transfer, please contact me directly, Lauren Buckner, using the form below.