AUDGBP: Polls Still See a Rate Rise in 2023

AUD GBP Trades Above 0.5300 Ahead of Consumer Confidence

The AUDGBP exchange rate is 0.10% lower on Friday as the pair consolidates under the 0.5600 level. Traders are undecided about the exchange rate outlook and are happy to sit back at the levels. A Reuters poll of economists still sees the RBA holding off on rate rises until 2023.

The AUD to GBP has traded in a tight range for most of 2021 as the outlook is balanced for the UK and Australian economies to both rebound well.

Economists happy with RBA projections

Australia’s Reserve Bank is expected to hold its interest rate at the record low of 0.1% when it meets next week, according to a Reuters poll of economists.

Only one of the 25 analysts surveyed by Reuters, thought that there would be a change to the bank’s policy. The outlier predicted a small 5 basis point cut to 0.05%, which would be a token move and is probably unlikely. Surprisingly, the vast majority of also expect to see no change to the interest rate until mid-2023.

This is maybe not set in stone after the strong recovery in Australia and economic data could force the bank to act more quickly. Inflation figures could be one headwind, while the country’s rapid housing increases could see pressure on the bank to take action on cheap lending. The bank will release a quarterly economic outlook in a week’s time where the RBA will likely increase their previous projections for the economy.

Australia’s debt is nearing a $1 trillion record, but Finance Minister Simon Birmingham hopes the country will grow out of it. Birmingham will deliver the latest budget on May 10th and he said of the debt levels:

“Those future projections show very much that at the rate at which we can grow the economy should enable us to continue to sustainably service the debts that we have”.

Tapering could pressure BoE on May 6th

The Bank of England meets on Thursday to announce its latest interest rate decision and some analysts are expecting it to reduce the amount of assets that it has been purchasing.

An analyst at Scotiabank said:

“The BoE’s meeting a week from now comes into focus with economists mixed over whether the bank will tee up a reduction in its rate of asset purchases – with some even expecting such a move to be announced next week.”

Tapering would be seen as laying the groundwork for an interest rate increase and is a stark contrast to the talk of negative interest rates only a few months ago. Analysts were more cautious at Standard Chartered, saying:

 

“Given the size of the UK’s output gap, the likelihood that unemployment still heads higher later this year as government employment support is withdrawn, and risks associated with new, we still expect the BoE to be largely focused on a return to full employment”.

The AUDGBP sees sterling in pole position at the moment, but the pair has struggled to find a larger trend this year and breakouts in both directions have snapped back in the other direction.