The Australian dollar was 0.90% higher on Monday with the AUDGBP pair trading at 0.5120. The move higher in the Aussie is another bounce from the support levels around 0.5000.
Markets are now awaiting the latest decision on interest rates from the Reserve Bank of Australia (RBA) tomorrow. Many analysts are expecting the RBA to cut interest rates following the effects on the economy of the wildfires and now the Coronavirus.
Will the Reserve Bank Cut Interest Rates Again?
Australia’s interest rate has been set at 0.75% since the last RBA cut from 1% in October. Some were expecting the bank to lower the interest rate last month, but they held it steady. Policy makers then stated that the bank would only consider further stimulus measures if the employment situation deteriorated. A small uptick in the most recent unemployment figure was balanced out with additional jobs added to the forecast so that would be unlikely to warrant further action.
However, it could be said that central banks globally are using the Coronavirus spread as an opportunity to lower rates once again in the hopes of boosting their economies. An interest rate cut would be a negative for the Australian dollar against the pound, but the movement may be muted if the U.K. join the global rush to cut rates and provide further stimulus. The 0.5000 level will therefore be key to the path of the AUDGBP rate in coming days and weeks. Wednesday will be another key day for the pair as the Australian economy releases its latest Gross Domestic Product (GDP) figure for the fourth quarter, with the market expecting year-on-year growth at 2.0%.
Coronavirus Still Looms Over European Economies
The Coronavirus is still a headwind for the European economies, and this could dent the pound’s outlook in the near future. The U.K. now has 40 reported cases of the virus and Europe saw a 44% surge in cases overnight. If the situation worsens and affects the economy, the AUDGBP will erase some of the recent losses that occurred due to the effects on China’s economy.
The markets will put Coronavirus fears aside to focus on the two key events of interest rates and GDP from Australia over the next two days. The decision by the RBA and the growth data will give traders a better understanding of the bank’s intentions and the strength of the economy, which will drive the Australian dollar forecast.
If you would like to learn on factors influencing AUDGBP exchange rates for an upcoming currency transfer, feel free to contact myself, Royston Howell, using the form below.