The AUDGBP, AUDEUR and AUDUSD rate have weakened this week following news on Tuesday that localised lock down measures are to be re-imposed. As of midnight on Wednesday, Australia’s second largest city, Melbourne, will be shut down for six weeks and for the first time in 100 years, the border between New South Wales and Victoria will be closed.
Australia has so far managed to control the virus far better than many other major economies, with a national total of under 9000 cases and just over 100 deaths. As such, the Australian economy has performed better than many others and the AUD has performed well overall, over the past few months. On Tuesday however, a spike of almost 200 cases was reported in the state of Victoria and they are moving quickly once again to curb the spread of the virus.
Speaking on Tuesday, Daniel Andrews, the Premier of Victoria, urged people to be cautious and follow the rules, and said that these measures were onerous but necessary. “We have to be clear with each other that this is not over,” Andrews stated. “And pretending that it is because we all want it to be over is not the answer. It is indeed part of the problem. A very big part of the problem.” This move has created a great deal of uncertainty and therefore caused a flight to safety for risk adverse investors, meaning historically ‘riskier’ currencies such as AUD have fallen in value.
RBA Keeps Interest Rate at Record Lows and Warns of Bumpy Recovery
Before Victoria’s decision to shut down the State yesterday morning, the Reserve Bank of Australia (RBA) announced their latest monetary policy and interest rate decision, and are expecting a bumpy recovery for the economy from the virus, even without these latest lockdown measures being imposed.
As was widely expected by investors, the bank has kept the official interest rate at its record low of 0.25% and the question now is whether or not this will be cut going forward, depending on how well the spread of COVID-19 can be controlled over the coming weeks. The tone from RBA Governor Phillip Lowe was positive during his press conference, and he pointed towards some positive moves for the economy, especially a slight lift in retail spending of late. He did temper this however, making it clear that there was still a long road ahead.
Speaking in his press conference, Lowe stated, “Uncertainty about the health situation and the future strength of the economy is making many households and businesses cautious, and this is affecting consumption and investment plans.” There has been some improvement in jobs numbers, but Lowe also said that many businesses will likely be looking to restructure, and this could affect the job market moving forwards.
How Will the Lockdown Measures Affect AUD Exchange Rates?
Given the new restrictions being brought in, it will be interesting to monitor how this affects the economy and strength of AUD moving forward. It is likely that if the virus continues to spread through the country and further measures are imposed, we could see AUDGBP continue to suffer. If inflation levels continue to fall and the jobs market suffers, the RBA may look to cut interest rates further and this could also see AUD rates drop. Having said that, at the beginning of the COVID-19 outbreak we saw AUD make gains against many major currencies.
Since lockdown measures started globally in March, AUDGBP exchange rates have moved by as much as 13% in value. It seems likely that this level of volatility will continue to impact AUD rates and keeping in contact with your account manager here could help you to make an informed decision on when best to buy your currency. We also offer a range of contract types that can help you benefit from spikes in the market, or limit your exposure to adverse market movements.