GBP/AUD Exchange Rate Slides on BoE’s Stark Warning
The Pound to Australian Dollar (GBP/AUD) exchange rate is on the defensive this morning after the Bank of England (BoE) warned the UK is on track for its deepest contraction in history.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9157, down roughly 0.7% from this morning’s opening rate.
Pound (GBP) Undermined by BoE’s Gloomy Forecast
The Pound (GBP) finds itself on the back foot this morning in the wake of the BoE’s latest rate decision.
As expected, the BoE left interest rates on hold this month, having slashed them to a record low of 0.1% back in March.
Instead it was the BoE’s forecasts which were the focus today, with Sterling sentiment taking a hit as the bank didn’t pull its punches when describing the coronavirus crisis’ potential impact on the UK economy.
The BoE warned the UK economy is on track to shrink by 14% this year so long as the lockdown is relaxed by June and that the unemployment rate could soon spike to 9%.
Richard Pearson, Director at Investment Platform, EQi, commented:
‘The Bank of England’s warnings over the economy are stark. The fact the committee were split over more energetic stimulus measures that we already have shows how far into the unknown we are.’
However, it wasn’t all doom and gloom from the BoE this morning, with GBP investors welcoming signals that the bank could expand its quantitative easing programme to help support the government’s coronavirus recovery efforts.
Australian Dollar (AUD) Buoyed by Record Trade Surplus
Meanwhile, the Australian Dollar (AUD) is soaring this morning after Australia reported a record trade surplus in March.
According to data published by the Australian Bureau of Statistics (ABS), Australia’s trade surplus swelled from AU$3.87bn to AU$10.6bn in March, dwarfing the previous all-time high stuck last year.
This came as the value of Australian exports unexpected skyrocketed, rising 15% as imports fell by 4%.
Andrew Hanlan, a senior economist at Westpac Banking Corp comments:
‘China’s reopening after the February lock-down provided a boost to the trade in goods, Key to this was the rebound in iron ore production and export shipments post Cyclone Damien.’
The figures are a welcome surprise to AUD investors and will bolster hopes that a strong export sector will help to minimize job cuts.
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