Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Falls as RBA Leaves Rates Unchanged
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slumped by around -0.4% on Tuesday morning. This left the pairing trading at around AU$1.8323.
The Australian Dollar edged higher against the Pound today after the Reserve Bank of Australia (RBA) left interest rates at an all-time low.
However, the ‘Aussie’ rallied as the bank sounded less gloomy as the economy gradually reopens after coronavirus lockdown measures.
The RBA left rates at 0.25% in its monthly monetary policy meeting as expected, with the bank noting the ‘accommodative approach will be maintained as long as it is required’.
In a short statement following the decision, RBA Governor Philip Lowe noted the bank was prepared to scale up government bond purchases if necessary.
The country’s economy is experiencing its largest contraction since the 1930s in the current quarter. However, Lowe noted ‘it is possible that the depth of the downturn will be less than earlier expected.’
Added to this, the RBA chief noted ‘there has also been a pick-up in some forms of consumer spending’ which offered AUD further support.
Sterling (GBP) Slides Ahead of Brexit Talks
The Pound slipped against the Australian Dollar today as risk appetite amongst investors improved. Optimism about a global economic recovery sent traders flocking to riskier assets.
This allowed AUD to edge higher, while Sterling was able to climb to a one-month high against the safe-haven US Dollar (USD).
However, these gains were limited by growing unrest in the United States and concerns over US-China tensions.
The ‘Aussie’ was able to edge higher despite another night of protests in the US. President Donald Trump has also threatened to use the army if necessary, although this has not had much of an impact on markets.
Meanwhile, Sterling was offered some support as today will see the latest round of Brexit negotiations between the UK and EU.
The next round of talks is expected to focus on fisheries, and reports have suggested the UK is expected to indicate flexibility over this key sticking point.
The Times reported London will be flexible if Brussels agrees to lessen its ‘maximalist’ demands.
Pound Australian Dollar Outlook: Will Brexit Optimism Buoy GBP?
Looking ahead, the Australian Dollar (AUD) could give up some of today’s gains against the Pound (GBP) following the release of Q1 GDP data.
If GDP plummets further than expected in the first three months of 2020 due to the coronavirus pandemic, the ‘Aussie’ will suffer further losses.
Meanwhile, Sterling could edge higher against the Australian Dollar if Brexit negotiations with the European Union show signs of progress.
If the latest round of post-Brexit trade talks show signs of progress it will boost the British currency and send the Pound Australian Dollar (GBP/AUD) exchange rate higher.