BoE and Melbourne Lockdown Sends the Pound Australian Dollar (GBP/AUD) Exchange Rate Higher

August 6, 2020 - Written by John Cameron

STORY LINK BoE and Melbourne Lockdown Sends the Pound Australian Dollar (GBP/AUD) Exchange Rate Higher

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Jumps Following BoE Meeting

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate rallied by 0.6% on Thursday morning following the Bank of England’s (BoE) monetary policy meeting.

This left the pairing trading at around AU$1.8343.

The Pound was able to strengthen against a handful of currencies including the Australian Dollar after the BoE’s more optimistic tone.

The latest economic forecasts were not as grim as those presented just a few months ago in May, which boosted Sterling.

The economy is now expected to slump by -9.5% in 2020, which would make this the worst performance in 99 years.

Although, this was more upbeat than the previous predication of a -14.5% contraction, which would have seen the British economy suffer its worst decline in growth in over 300 years.

However, while the bank expects the downturn will be less severe than previously thought, policymakers still believe the unemployment rate will almost double.

Unemployment is expected to jump to 7.5% by the end of the year, but below earlier estimation of 10% unemployment.

Added to this, the Bank of England also believe it will take the economy longer to return to pre-coronavirus levels.

The BoE’s governor, Andrew Bailey noted the country faces some ‘very hard yards’ and the unemployment forecasts is a ‘very bad story’.

Speaking on Thursday, Bailey said:

‘There are some very hard yards, to borrow a rugby phrase, to come. And frankly, we are ready to act, should that be needed.’

Australian Dollar (AUD) Slides as Melbourne Enters New Lockdown

The Australian Dollar struggled to make gains against the Pound on Thursday after an upbeat Bank of England (BoE) meeting.

Although, in the latest Reuters poll saw analysts upgrade forecasts for the ‘Aussie’.

The Australian currency was being supported by upbeat data from China. The Chinese economy continues to purchase Australian resources which has upped the price for key exports including iron ore.

This also boosted the currency as the country was gifted with its largest current account surplus in decades.

A weaker US Dollar also offered support overnight, but the US currency’s recovery later today caused AUD to edge lower.

The Australian Dollar also suffered losses after the country’s second-largest city began the first day of a fresh six-week lockdown.

Melbourne saw the closure of most shops and businesses which sparked new fears of food shortages as city officials battle a second wave of the virus.

Australia’s Health Minister, Greg Hunt told reporters:

‘We’ve flattened that curve once, we’ll flatten that curve again.’

Pound Australian Dollar Outlook: RBA Statement in Focus

Looking ahead, the Australian Dollar (AUD) could extend its losses against the Pound (GBP) following the release of the latest Ai Group Services Index.

If the index disappoints traders and does not rise as high as expected in July, it will weigh on the Australian Dollar.

Meanwhile, the ‘Aussie’ could reverse earlier losses following the release of the Reserve Bank of Australia’s (RBA) Statement on Monetary Policy.

If the bank’s official statement is more upbeat than expected after the bank said it would step into the market to purchase more government debt earlier this week, it will send the Pound Australian Dollar (GBP/AUD) exchange rate higher.

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TAGS: Pound Australian Dollar Forecasts