The AUDGBP exchange rate finally saw a move beyond the trading range that has dominated since January. Sterling strength saw the pair drop to new lows for the year at 0.5477, but strong buying in the Aussie dollar saw the pair close at 0.5503, which could mark a potential low.
With no economic data available this morning the pound may pause at these levels after another strong week for sterling bulls.
Reserve Bank Interest Rate Meeting Looms on Tuesday
Next week will see the latest interest rate decision from the Reserve Bank of Australia with analysts expecting no change to the bank’s recent policy.
Although the Australian economy is rebounding more strongly than expected, the RBA has stuck to its February statements that policy will remain accommodative until the jobs market reaches full capacity, which it said could 2024. The Aussie economy actually has more people in work than before the crisis, while Chinese demand for iron ore and other minerals is keeping the economy strong.
Traders are pricing in the expectation that the bank will be forced to move more quickly on interest rates, with an expectation that its economy will force the bank’s hand by 2022. Analysts at MUFG bank said:
“The RBA will continue to have a hard time convincing the markets of its ultra-loose policy persisting as long as suggested.”
The central bank could also see pressure to make a statement this week on the housing market after the RBNZ took action to halt speculation in its own housing market. Australia is also seeing property and lending soaring in the country and any RBA remarks could adjust the AUDGBP currency rate.
UK and Aussie PMIs Released
Exports from Australia were lower by 1% on the month to A$38.9 billion after climbing 6% percent in January, while imports were 5.0% higher from the 2% percent in the previous month.
The numbers also come after a report from Australia’s Department of Foreign Affairs and Trade, which said that China’s thirst for iron ore exports is hiding the slump in other products. Excluding iron ore, goods exports to China slumped by 40% in the last six months of 2020, compared to the same period in 2019. This is due to the trade spat between the two countries which saw China putting tariffs on some Australian products. Australia’s coal exports were the worst-hit with China taking zero in January, compared to A$1.4bn six months earlier. The Australian dollar would get a boost if the trade relationship between the two countries can be resolved quickly.
AUDGBP bulls look keen to hold the 0.55 level in the pair and there is a key level below this at 0.54 that could open up big gains in the pound.
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