GBPAUD is coming under pressure today, and on a break to the June low of 1.8052, the GBPAUD pair might resume its exaggerated slide from 2.08.
The Bank of England stroke a slightly more hawkish tone than expected at their June 18, 2020 interest rate meeting, by only opting to add £100 billion to their quantitate easing program. This amount was at the lower end of expectations according to the Financial Times.
The lower amount of QE means that the BoE will not be buying all the bonds that the UK government will issue this year. This could lift interest rates in the UK, and should be GBP positive. The central bank also said that the BoE is ready to halt purchases if inflation is anticipated to reach their two-per cent annual inflation target.
Today’s BoE Rate Meeting Should Have Boosted GBPAUD
The lower amount of QE, and that they are ready to halt purchases should be bullish for the Pound Sterling against the Australian dollar. Further supporting the Pound Sterling was the no mention of reducing the key central bank rate to negative levels. However, price action wise the GBP has failed to gain traction, and it is losing out against the Euro, AUD, and USD in today’s trading.
As a possible explanation for the Pound Sterling not gaining, is that investors could believe that the lack of QE will hamper UK growth in the months ahead. As a comparison when the European Central bank added 600 billion Euros, vs the 500 billion expected at their last rate meeting, the Euro gained.
The technical outlook for GBPAUD remains downwards, as it has since the price reached a high of 2.08 on March 19, 2020. Since June the price has been trading sideways, but the GBPAUD is now seeking itself towards the June low at 1.8046, and if the exchange rate manages to trade below the June low, it might open the door for further losses. The next support level below the June low is the September 2019 low at 1.7796, followed by the July 19, 2019 low at 1.7619.
Cautions bullish traders would need to stand aside for the moment, and wait until the June high at 1.8453 is breached, as this would probably indicate that a medium-term low would be in place.