The AUDGBP exchange rate is 0.10% higher on Monday as the Aussie dollar sees a fourth day of gains against the British pound. The economic calendar is light for the Australian dollar and sterling this week with an Australian inflation release on Wednesday being the only key release for the pair. Eyes will be on that number with markets expecting a bounce to 1.4%
The AUD to GBP trades at 0.5585 with the 0.5600 level being the key obstacle again for the pair.
Australian inflation should set the tone for the RBA
Australia’s inflation rate for Q1 is expected to see a jump to 1.4% from 0.9% and that will determine whether the RBA sees further pressure over its monetary policy decisions.
Canada made a surprise move to wind down its bond buying last week and that move will put some spotlight on the Reserve Bank of Australia. The central bank has stubbornly stuck to their 2023-24 rate hike plans, but markets don’t really see them being able to hold out that long. It’s likely that the bank are trying to keep a lid on the Australian dollar.
Wednesday will also see a Federal Reserve interest rate announcement, where the press conference could also field similar questions in light of the recent inflationary pricing in the US as the country moves further to full capacity. The tapering question could flip the recent risk asset trends and the Aussie dollar could see volatility.
The UK economy is humming once again but traders are wary of the underlying trends in employment with the unemployment rate falling to 4.9%, but some analysts fear that the real number could be double that.
Westpac sees heat coming out of the housing market
Australia’s soaring housing market is set to cool according to Westpac Bank, with the group seeing strained affordability and lending curbs as the reasons.
The bank has upped its property forecast for this year to 15%, from 10% previously, to reflect the recent price surge. The bank has stuck to a two-year expectation of a 20% increase, but this is maybe just hopeful. Inflation is set to pick up as economies reopen and Australia could see even more speculation in property as investors fear RBA intervention.
Westpac said: “While we remain bullish on Australia’s housing outlook, we do not expect the red-hot pace of the first few months of 2021 to continue. The general pattern of dwelling price cycles often sees strong bursts followed by an extended period of flattening.”
New Zealand’s RBNZ made a move to curb speculation, which saw a sharp slump in the Kiwi rate. Their Australian counterparts have said they are “watching closely” when it comes to their own market as there is a risk of mining sector employees and those in the tourism or hospitality sectors diverging further in their ability to manage the property ladder.
The AUDGBP still has the same trading range between the 0.5550 and 0.5600 levels and the big picture trends mentioned here will likely be the reason for any breakout from these levels.