The AUDGBP exchange rate was 0.34% higher on Wednesday as the pair bounced further from a test of the November 2020 lows. The Aussie dollar has been under pressure from a slump in iron ore prices as the Chinese government moved to crackdown on price manipulation amongst domestic companies.
The AUD to GBP rate trades at 0.5500 and could see another 50 pip gain on the week to the 50 day moving average.
Westpac analyst doubts speculation in iron ore
Westpac analyst Robert Rennie is not accepting China’s excuse for surging iron ore and steel prices, that they are being driven by speculation and hoarding.
In a series of tweets, Rennie said “Happy to debate, but I am not sure that there are too many signs of ‘excessive speculation’ in Chinese #IronOre and #steel futures markets.”
“Aggregate iron ore and steel futures volumes are much closer to multi-year lows, and nowhere near historic highs,” he added.
Iron ore prices have slumped 20 per cent this month after surging to record highs, driven by stubborn demand for steel from China.
In addition, Mr Rennie, who is Westpac’s head of financial market strategy, tweeted the same is true when one looks at iron ore port inventory – “no obvious signs of hoarding there”.
Australian iron ore shipments to China posted record high in April, helping to drive Australian exports to an all-time high of $36 billion and China no longer wants to pay record prices.
Minimum wage growth seen as necessary for Aussie growth
A thinktank has said a minimum wage pay rise is necessary for Australia’s future economic growth prospects.
The 2021 Budget forecast economic growth will be driven by 5.5% growth in consumer spending in 2021-22, but this is a “highly optimistic assumption” and simply won’t happen without a “significant increase” of 3.5% on the minimum wage, Per Capita has argued in a new paper.
“Higher wages for low and middle-income earners translates directly to more consumer spending in local economies,” the paper said.
“Put simply, if people don’t have enough hours of work, or if their hourly rate of pay is insufficient to meet the growing costs of living, they won’t have sufficient money to spend into the economy.”
The report is timely as the latest Aussie employment numbers showed a large proportion of new hires were not in long-term roles and many were working two or more jobs.
Australia saw the release of Westpac leading index figures for the months, with the number coming in lower than expected at 0.2% compared to 0.5%.
The Aussie versus the pound will see no more economic releases for the week and will instead look at the virus situation in the UK with the Indian variant spreading.
The AUDGBP pair saw a bounce at the November 2020 lows at 0.5460 and this has the potential for a bottom in the pair in a quiet week for economic data.