The AUDGBP exchange rate was lower by almost 0.4% on Wednesday as RBA Governor Philip Lowe signalled that the bank didn’t agree with an early rise in interest rates. The central bank chief suggested that interest rates would be unlikely to rise before 2024.
AUDGBP is trading at the 0.5535 level and the pound is once again looking to test the 0.5500 price level.
RBA’s Lowe Does Not See Rates Rising Early
Australian bond traders were given a wake up call by the Reserve Bank of Australia Governor Philip Lowe, he said he did not share market expectations for higher rates.
“Over the past couple of weeks market pricing has implied an expectation of possible increases in the cash rate as early as late next year and then again in 2023. This is not an expectation that we share.”
The Governor was speaking at a summit hosted by the AFR and sought to pour cold water on recent yield rises, in line with the move in US 10-yr rates.
The comments could put the bank on a collision course with markets if inflation rises too fast once economies are reopened. Lowe repeated once more that RBA would need to see inflation at 2%, before thinking about moving rates. That would also likely need a 3% growth for wages, with current levels at a record low of 1.4%.
Aussie Consumer Feels the Cheer, WA Economy ‘Best in World’
The latest Westpac Consumer Confidence number was higher than expected at 111.8 compared to expectations for a 109.1 reading.
It was no real surprise that the number would improve after the economy has once again emerged from the lockdowns, while the country has seen growth for a third-straight quarter. The recent rollout of the vaccines will also have citizens hopeful that the virus can be contained.
The state of Western Australia was given a boost by the credit ratings agency S&P, which said it had the best economy in the world. WA beat North Rhine Westphalia in Germany, which was second ahead of Queensland.
The news is a boost for premier Mark McGowan as locals heads to the polls this weekend to vote in the latest state election, which Mr McGowan’s Labor Party should easily win. Opposition leader Zak Kirkup, who has only been in the job since November, is already conceding defeat. Western Australia is booming on the back of Chinese exports and a soaring iron ore price, which has seen consumer confidence at 11-year highs in the state.
The AUDGBP rate is now looking to test the lower levels as traders weigh up the potential for UK interest rates to rise ahead of Australia. Get in touch to discuss your next currency exchange and how it’s like to be impacted in the short term.