The AUDGBP exchange rate is 0.16% lower on Tuesday as the Aussie dollar failed to see a spark on the Australian Reserve Bank’s latest monetary policy and interest rate decision. higher on Monday as the Aussie dollar adds to gains on Friday. The bank set a much more promising forecast unemployment rate of 4.5% into the year-end, but policymakers were careful not to spur gains in the Australian currency.
The AUD to GBP trades at 0.5570 as the pair struggles to get above the stubborn 0.5600 level.
RBA adds to wish list for recovery
The Reserve Bank of Australia held their key interest rate at 0.1% as expected as the bank’s governor Philip Lowe looks for excuses to keep the rates anchored at this level into 2024. Lowe has implied that he wants the country’s nascent recovery to show up further in nominal wages and prices, but the bank really wants to support governments and banks with low borrowing costs.
With the cash rate now locked in at 01% for the foreseeable future, further decisions will await the RBA by July. The bank will have to decide whether to extend or taper its three-year yield curve target and the $200 billion bond purchase program. Traders see it as unnecessary with the economy remaining strong. The bank focuses a lot on the labor market and the end of the JobKeeper furlough scheme has failed to dent the Aussie economy. Two further jobs reports will be seen before the bank meets in July.
Bank of England and PMIs will drive the pound
Today will see the release of UK PMIs with the market looking for a 60/7 reading after 58.9 in the previous month. The figures would cap strong gains for the British manufacturing sector, which has been able to shrug off lockdowns and continue humming along. Supply chain shortages have dented the PMI numbers in China and this could be a factor to look out for.
The UK will also see its central bank on stage this week with the BoE also expected to keep rates stuck at 0.1%. Traders are also looking for an update on bond buying stimulus programs, but central banks have remained tight-lipped and don’t want to rock the market.
The difference between the RBA and BoE is in the jobs market as UK unemployment numbers have been strong, but they are being masked by the ongoing furlough program. Some analysts suggest that the UK number could be twice as high, so the BoE will not want markets to get ahead of itself with bond market moves.
The AUDGBP pair has traded in the current price area since late-January and the pair has been unable to see a clear trend as the economy and virus situation has swung in both countries.