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Reserve Bank of Australia (RBA) Interest Rate Cut Pressures Pound to Australian Dollar Exchange Rate

Australian Dollar Currency Forecast

Pound to Australian Dollar Exchange Rate down despite Surprise RBA Rate Cut

It’s already been a busy Tuesday for the Australian Dollar (AUD) outlook, but the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate remains low. The Pound (GBP) is rebounding slightly today, but the latest Reserve Bank of Australia (RBA) news actually boosted the ‘Aussie’.

Following last week’s climb from 1.9558 to 1.9700, GBP/AUD has already lost all those gains. The Pound has been unable to hold its ground amid fresh Brexit and Bank of England (BoE) speculation.

As a result of the Pound’s weakness, GBP/AUD fell over two cents yesterday. GBP/AUD still trends close to yesterday’s week and a half low of 1.9461.

The Australian Dollar hasn’t slipped much from its recent highs, even after the Reserve Bank of Australia (RBA) shocked investors with a sudden interest rate cut. Various reactions to the bank cut, including reassurance and expectation of deeper easing, contributed to AUD gains.

Pound (GBP) Exchange Rate Outlook Floundering amid Brexit and Central Bank Bets

The Pound’s movement is mixed today, as investors continue to digest the recent rise in hard Brexit fears and Bank of England (BoE) interest rate cut bets.

The BoE said yesterday that it was prepared to take the necessary steps to help protect Britain’s economy from the outbreak of coronavirus Covid-19. UK-EU Brexit negotiations also began their next phase.

Against some major rivals, the Pound is seeing a slight rebound. Investors are buying the British currency back slightly from its cheapest levels in profit-taking.

Sterling’s recovery did find a little support from some of this morning’s comments from outgoing Bank of England (BoE) Governor Mark Carney however. Carney said the coronavirus may be a large shock but it should also be temporary. He said:

‘The Bank of England’s role is to help UK businesses and households manage through an economic shock which could prove large, but which will ultimately be temporary.’

His comments, as well the lack of any urgently dovish signals, were seen as slightly reassuring and helped the Pound today.

Australian Dollar (AUD) Exchange Rates Up despite Reserve Bank of Australia (RBA) Rate Cut

The Reserve Bank of Australia (RBA) surprised markets today with a change in monetary policy.

Despite analysts generally predicting the RBA would leave policy frozen, the bank unexpectedly cut rates from -0.75% to 0.50% in its March policy decision this morning.

The RBA opted to get ahead of the curve and protect Australia’s economy from the potential impact of the coronavirus outbreak in the coming months. This made the RBA the first central bank to ease in response to Covid-19.

What’s more, the RBA indicated that it would likely cut rates further as the year drew on.

Interestingly, the Australian Dollar has been stronger since the rate cut rather than weaker.

This was both due to market relief that the RBA wanted to take action sooner rather than later. Some investors had also expected a deeper interest rate cut, so the moderate 25 basis point cut was seen as less dovish than speculated and this boosted AUD as well.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Awaits Australia’s Growth Outlook

A lack of stronger direction in the Pound or Australian Dollar is leaving GBP/AUD movement volatile today. For now, investors are awaiting news more influential for these currency outlooks.

The Pound’s rebound is likely to be limited, for example, unless there are some solid developments in Brexit or Britain’s outlook in the coming sessions. The Pound will be especially sensitive to any negative comments that come out of UK-EU Brexit negotiations.

Sterling investors may brush over tomorrow’s UK services PMI data unless it the results are notable and surprise the Pound outlook in some way.

Tomorrow’s Australian growth rate results from Q4 2019 are much more likely to be influential.

Australian growth is expected to have slowed quarter-on-quarter at the end of last year, but the yearly figure is expected to have improved to around 1.9%.

If this data falls short of expectations, Australia’s outlook will worsen and the Pound to Australian Dollar (GBP/AUD) exchange rate will recover more easily.