The AUDGBP exchange rate was flat on Wednesday as traders await the latest budget from UK Chancellor Rishi Sunak. Today saw an improvement in Australian GDP figures, while the RBA held off on further rate cuts yesterday, but the market is waiting for the budget before any move.
AUDGBP is trading at 0.5600 after the Aussie dollar was able to mount a two-day bounce from Friday’s losses related to bond markets.
GDP Boost for Australian Economy
The Australian economy grew at a faster-than-expected pace in the fourth quarter of 2020 data has confirmed this morning.
The economy was up 3.1% in the final quarter of the year, according to data from the Australian Bureau of Statistics (ABS). Economists had forecast a 2.5% increase and the latest figures were added to an upward revision for the third quarter.
In other data, credit and debit card spending by major banks, strong retail sales, employment and building activity have pointed to a strong start to 2021.
The Aussie government has recently doubled its stimulus to A$100bn as the wage subsidy scheme ends and that could play into employment figures in the months ahead. The RBA has said that it wants unemployment to drop from the current 6% to 4%. Last week saw the bank’s commitment to 0.1% interest rates tested as the bond market pushed up yields on Australian 3-yr government debt. This led to the central bank spending $3bn on bonds in one day to keep the rate capped.
Market Awaits Latest Sunak Budget
UK Chancellor Rishi Sunak will deliver his second budget to Parliament today as the country looks to strike a balance between growth measures and the country’s debt.
The finance minister has come under pressure from economists after reports that he will raise taxes, with many saying that it would be too early. The country will need to be supported as the reopening plan goes ahead. The furlough scheme will be extended, which was entirely expected after the Prime Minister stressed last weekend that they would not “pull the rug” from the recovery. The scheme has already cost the country £58bn and will now be extended into October 2021.
Mr Sunak is also reported to be planning a raid on corporate taxes from 19% to 26% and that could hit the pound sterling. He may implement a smaller rise and look to plug the holes in the finances from other areas such as capital gains and inheritance tax.
The opposition party has said it was “not the time” for tax raises and accused the Chancellor of “kicking the can down the road” on rates reform.
The AUDGBP rate has support at the 0.5500 level that will be the target if the budget pleases traders. If the measures are seen as too restrictive, the Aussie could rally on its GDP performance today with the 0.5700 level being the target again.
Get in touch to discuss these factors in further detail to see how your currency exchange is likely to be impacted.