Lower Chance of Surprise BoE Cut Sends Pound Australian Dollar (GBP/AUD) Exchange Rate Higher

Modified: Thursday, 5 March 2020 13:05 BST - Written by John Cameron

STORY LINK Lower Chance of Surprise BoE Cut Sends Pound Australian Dollar (GBP/AUD) Exchange Rate Higher

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Rises on Lower Chances of BoE Cut

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate rose, leaving the pairing trading at around AU$1.9501.

Sterling was able to make some gains against the Australian Dollar after expectations of an emergency UK rate cut decreased.

After Tuesday’s surprise rate cut from the US Federal Reserve, markets largely expect many central banks to follow suit.

The Bank of England’s (BoE) incoming Governor, Andrew Bailey said that action will be needed to fight the impact of Covid-19.

Although, he stated that any easing measures would be done in tandem with the British government, which dampened expectations of a surprise cut.

In a note, analysts at MUFG said:

‘The stronger pound reflects in part some short-term relief that the BoE has not yet quickly followed the Fed and delivered an inter-meeting rate cut.

‘[Bailey’s remarks] signal that the BoE is not yet at the point to pull the trigger on further easing but we still expect sufficient evidence will be in place to take policy action at their next policy meeting on the 26th March.’

Despite the decrease in expectations of a surprise rate cut, many still expect the BoE to slash rates during its next monetary policy meeting.

Commenting on this, head of G10 currency strategy at CIBC Capital Markets, Jeremy Stretch said:

‘Certainly the market is priced for a 25 bps cut at the March meeting, so the market is anticipating the BoE will use up its arsenal.’

Australian Dollar (AUD) Edges Up from Earlier 11-Year Low

The Australian Dollar (AUD) edged lower on Thursday after becoming the best performing G10 currency over the past day, lifting from its earlier 11-year low.

The country’s Treasury Department said that it is not forecasting a recession, but the spread of Covid-19 is likely to see Q1 2020 growth slump by around 0.5%.

Commenting on this, Pepperstone’s head of research, Chris Weston said:

‘People are looking at Aussie dollar positions and whether or not they want to be long.

‘If you have a look at the outlook, the talk of the town now is what does quantitative easing look like in Australia, when is it likely to be deployed and how much of that is priced in.’

Pound Australian Dollar Outlook: Australian Data in Focus

Looking ahead to this evening, the Australian Dollar (AUD) could suffer further losses against the Pound (GBP) following the release of February’s Ai Group Services Index.

If February’s index slumps further than expected, ‘Aussie’ sentiment will be left dampened.

Meanwhile, AUD could extend losses further following the release of retail sales data.

If January’s sales slump further than expected, it will dampen ‘Aussie’ sentiment and cause the Pound Australia Dollar (GBP/AUD) exchange rate to make further gains.

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TAGS: Pound Australian Dollar Forecasts