The Pound to Australian Dollar exchange rate slumped this morning, as markets wait to hear what the Bank of England (BoE) has to say following the first interest rate decision of 2021.
At the time of writing the pairing is currently trading at around AU$1.7795.
Pound (GBP) Struggles but BoE Governor Bailey Could Provide Relief for Sterling
The Pound is struggling this morning as investors readily await the BoE’s interest rate decision.
Although no changes are expected, and interest rates are expected to stay at 0.1%, markets wait to hear from Governor Andrew Bailey regarding negative interest rates.
If Governor Bailey further disregards negative interest rates the Pound could see itself rallying against the Australian Dollar.
Analysts at TDS predict that:
‘We think that the BoE’s conclusions are likely to conclude that while negative interest rates should be part of the toolkit, and that the lower bound for Bank Rate is now below zero, negative rates are not imminent and are unlikely to be implemented in the current economic cycle.’
The BoE will also publish its economic forecasts today, which could put pressure on the Sterling as the third national lockdown weighs on any growth expectations for 2021.
In coronavirus developments for the UK, Government scientific adviser Andrew Hayward has said that there could be a ‘significant return to normality’ by summer, but only if the most vulnerable in the UK have been vaccinated.
Australian Dollar (AUD) Supported on Back of Better-Than-Expected Trade Figures
The Australian Dollar has been supported this morning as better-than-expected trade figures bolster the currency.
Data published by the Australian Bureau of Statistics show that Australia’s trade surplus rose to AU$6.785bn in December, the largest trades surplus since June 2020, as more countries begin to open their economies following on from the coronavirus pandemic.
Despite rising tensions with China, Australia’s largest trading partner, the country’s jump in trade surplus has caused investors to remain optimistic over the state of Australia’s economic recovery.
GBP/AUD Exchange Rate Forecast: RBA Policy Statement in Focus
The Pound to Australian Dollar exchange rate will continue to be dictated by any further coronavirus developments, and if global risk-aversion increases investors could sell out of the ‘Aussie.’
AUD investors will also look to the Reserve Bank of Australia’s (RBA) latest statement regarding their monetary policy. As the RBA recently announced an expansion in its quantitative easing programme earlier in the week, the latest statement could prove negative for AUD.