AUD to GBP Higher on Commodities and Aussie Wages

AUDGBP Drops Despite Hot Australian Inflation Release

The AUD to GBP exchange rate was 0.14% higher on Thursday as the Aussie dollar bounced strongly from the 0.5585 level. The pair now trades at 0.5641 after positive reports on wages and strong demand for commodities.

Next week will also bring the latest interest rate decision from the RBA and a UK budget, co we may not see major moves before then.

Commodities and mining dividends boost Aussie

Australia’s economy is being boosted by the recent strength in commodities. Investors are starting to buy commodities across the board as a hedge against government and central bank spending, while the trends are also boosting the performance of Aussie mining companies.

Australia’s Westpac has highlighted the effects of company dividends on Aussie dollar demand, saying:

“Dividend announcements for Australian mining companies that tend to announce in US$ and offer payment in A$, and the prospect of even larger dividends later in the year adds to the A$ demand story”.

Copper prices jumped past US$9,000 per tonne on Monday, which marked the highest price level 10 years, driven by demand from China.

The Australian Bureau of Statistics also revealed on Thursday that the average full-time salary is now $89,000. The mining industry had the largest salary level at $136,926.

RBA meeting and UK Chancellor loom

There is no major economic data on the cards until next week when the Reserve Bank of Australia releases its latest interest rate and monetary policy updates. The bank are expected to hold rates steady at 0.1% and after doubling their stimulus package to AUD$200bn last month, they will probably hold off on any stimulus measures.

The following day will likely be the key driver as the UK Chancellor Rishi Sunak gets the chance to give the economy a boost with the latest budget. The UK will see a staged opening in its economy into June and the Chancellor will likely extend some of the previous support measures, such as the furlough program.

Boris Johnson said last week that they will not “pull the rug” on the economy, but they really have no choice as the UK just delivered the worst economic year in 300 and unemployment has crept up to 5.1% despite the furlough and other supports being in place.

Investors will look to the stimulus measures next week and this will likely determine the outlook for the AUD to GBP in the year ahead as both countries have continued with their vaccine rollout. A pullback in commodities could hit the Aussie dollar but risky assets are still seeing buyers with the US Dow Jones at another record yesterday.

The AUDGBP is looking to move to the resistance at 0.5700 ahead of next week’s events.