The AUDGBP exchange rate saw its best day since March 1st as weakness in sterling was grasped by Aussie dollar bulls. Traders are worried that the wheels are coming off of Boris Johnson’s roadmap recovery train and decided to book profits in the currency.
The AUDGBP found support at the 0.5500 level and moved to trade at 0.5540 today.
Stronger PMI Adds to RBA Dovishness
Today saw the release of services Purchasing Manager’s Index (PMI) figures for the Australian economy and the result was a stronger 55.5 reading.
The latest PMI reading comes after yesterday’s Reserve Bank of Australia interest rate meeting where the bank kept the key interest rate at 0.1% and remained dovish on monetary policy. The bank said they were also watching the housing market closely but refused to hint of any immediate action.
“The economy is operating with considerable spare capacity and unemployment is still too high. It will take some time to reduce this spare capacity and for the labour market to be tight enough to generate wage increases that are consistent with achieving the inflation target.”
The International Monetary Fund said yesterday that the Australian economy should grow 4.5% this year. The group also saw unemployment dropping to 6% in 2021 and 5.5% in 2022. The Aussie economy contracted by 2.4% last year with the borders being shutdown to tourism and business trade.
Australia finally announced a travel arrangement with New Zealand which will begin on April 19th. Travellers won’t be getting their hopes up after the so-called ‘bubble’ was cancelled twice in the past year.
UK Prime Minister Faces Roadmap Pressure
The British Prime Minister Boris Johnson is also facing increasing pressure at home over his policies to reopen the economy. After vaccinating more than half of the country, the expectation was for a smooth return to business, but Johnson and his health advisors seem intent on grinding forward with scaremongering and red tape.
The hopes for an early return to foreign travel have been dashed as the Prime Minister has stuck to his May 17th date. It also emerged that a family of four could face costs of £600 just for virus testing to a green zone country in the planned traffic light system. This would make flying abroad a costly process, even with a vaccine.
A group of Johnson’s own Tory MPs are also pushing back on his plans to go ahead with vaccination passports. Opposition leaders are also raising questions about freedoms and a ‘two-tier society’ but the Prime Minister even hinted at pushing the plan through without Parliament’s blessing which could lead to friction down the line.
The Australian dollar has been on a downward trend versus the British Pound from the end of January has had a few bounces that failed to materialise into something larger. The good news may be priced in for the British rebound and further gains in the pair could be seen this week.
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