The AUD to GBP exchange rate is trading 025% higher on Wednesday after the pair closed at the lowest level since December 10th following the latest RBA injection of stimulus. The bank doubled up on its recent A$100 billion support, despite talk of a potential tapering in the near future.
AUDGBP is trading at 0.5580 and the Aussie dollar wants to take back the 0.5600 level.
Bushfires and Lockdowns start February in Perth
February got off on a sour note for Western Australian capital Perth. Wildfires on the fringes of the city have destroyed several homes and led to forced evacuations, while the city entered another virus lockdown at the start of the week. Two million Perth residents of the city have been forced to stay home over the virus after authorities believe a traveller had contracted the UK strain of the virus.
Australia’s Parliament has returned for the first time this year and the Prime Minister is targeting economic relief for businesses. The tourism, airlines and hospitality sectors are among those asking for additional financial assistance after the government announced plans to wind down the wage subsidy program on the 31st of March. Removing the subsidy could see pressure on the jobs market after recent performance had strengthened the Aussie dollar.
Prime Minister Scott Morrison didn’t rule out further assistance, saying:
“For those sectors and those areas specifically who are continuing to contend with the effects of the pandemic, we have already demonstrated that we will continue to provide targeted support. That is exactly what the government will do.”
Bank of England Follows the RBA
The Bank of England will announce their latest interest rate and monetary policy ideas on Thursday with the central bank expected to hold steady on rates at 0.1%. The UK currently has the same exchange rate as Australia and the path of the exchange will hinge on the plans for stimulus. With the RBA doubling their bond buying program, a dovish BoE would boost sterling.
The bank is looking to wait for the second quarter after the recent signing of the Brexit agreement, alongside their hopes for a Q2 economic bounce. This should be clarified in the release of the latest quarterly report.
The UK has done well in its vaccination program with nine million doses of the virus vaccine dished out to vulnerable age groups and key workers. The latest news of virus mutations could throw a spanner in the works, but for now we are likely to see the Bank of England take a step back from any big monetary actions with the UK budget coming next month.
The AUDGBP rate is on track for a further move lower towards the 0.5500 level and the BoE could seal that move if they hold off on further stimulus.
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