The AUDGBP exchange rate found a base at the 0.5400 level on Tuesday and will now await PMI data for Australia and the UK. A speech is also due from the RBA’s Ellis, but the headline event will be Thursday with the latest Bank of England interest rate and policy outlook. The bank will have to appease investors after the recent surge in inflation.
The AUD to GBP rate was trading at 0.5413 after touching a new yearly low at 0.5400.
PMI data up for the UK and Australia
The Australian dollar versus the pound will be driven by PMI data on Wednesday with the latest manufacturing and services data due for both. The Aussie manufacturing number has been steadily rising since August 2020, with a move to 60.4 last month. Services data dipped last month from 58.8 to 58 and it was also the highest levels since 2020.
The RBA Assistant Governor Luci Ellis will also speak at a business lunch in Adelaide and will get a chance to respond to last week’s surge in jobs data.
The massive 115,200 rise in new jobs added and a subsequent fall in the unemployment rate to 5.1 per cent was described as a ‘game changer’ by a key economist with regards to the interest rate outlook.
That speech will then be followed by the UK version of the PMI data and the numbers are set to stall after a recent surge with the reopening. Manufacturing weathered some of the pandemic and climbed steadily, but the services sector is most important, and the reopening has fired up that number. The manufacturing is likely to slow due to inflation and the supply chain shortages that have plagued the market.
Bank of England ahead on Thursday
Just as the Australian Reserve Bank will be pressured on the jobs figures, the BoE will be face the music after a surge in inflation saw the UK inflation rate at 2.1%, which is higher than the bank’s 2% target. It was the first time that had happened in two years and traders will want to know if it changes the timeline for interest rate rises.
Outgoing Chief Economist Andy Haldane will see his last vote and he previously warned that Britain is at the “most dangerous moment” for managing inflationary risks since the UK left the ERM in 1992. Talking up the threat posed by the “beast of inflation” maybe hastened his exit as the bank tries to adopt a stoci approach to interest rate rises.
The British economy on Tuesday saw its debt pile rise to 99% of GDP and the last thing the government needs is higher borrowing prices. That could see the BoE try to sit on the fence with a token nod to higher rates in late-2022.
The AUD to GBP exchange rate has bounced at 0.5400 but it will need a catalyst to rebound and the RBA v BoE speeches could be the key.