The AUDGBP exchange rate was 0.23% higher on Tuesday after the latest Reserve Bank of Australia meeting. The pair is higher for a second after a slump below the 0.5450 level last week. The Aussie dollar to pound saw new lows for the year into the weekend and is now trying to cling to the 0.5450 level.
The AUD to GBP rate is trading at 0.5460 level and that is resistance for gains in the Aussie.
RBA Holds Rates at Record Lows
The Reserve Bank of Australia (RBA) kept its key policy at 0.1% for a sixth straight meeting, in a decision that was expected by economists in a Reuters poll.
Some in the market had expected a more hawkish tone from the central bank’s statement, which would match its New Zealand counterpart. The Reserve Bank of New Zealand (RBNZ) last week suggested that an end to the ultra-loose monetary policy was coming, leading some to believe that the RBA would follow their lead.
RBA Governor Philip Lowe instead justified the policy response despite a strong economic recovery by saying “inflation and wage pressures are subdued” and a pick-up in prices is expected to be only “gradual and modest.”
The RBA also repeated that it will not be raising interest rates until they see that inflation is “sustainably” within its 2-3% target band. Under the current scenario, underlying inflation is expected to be below the mid-point of that range into 2023.
Strong economic figures from Australia have seen analysts sharply upgrading their forecasts for Australia’s Q1 growth to 1.6% from 1% before the RBA statements.
Victoria Lockdown Fears Hold Aussie Down
A second week of virus lockdown looms for over 6 million Victorians over growing concern that the latest outbreak is spreading rapidly. The outbreak has been linked to the double mutant Indian strain, despite the fact that Australia’s borders are closed, and cases of 54 have bene reported on Tuesday.
Authorities have refused to rule out extending the state’s seven day ‘circuit breaker’ shutdown as a list of exposure sites increased to 329 venues.
The lockdown is Victoria’s fourth in 14 months and threatens to derail the latest economic advances from Australia. The state’s testing commander Jeroen Weimar said:
“My job is to keep going hard until we have everybody positive under control, lockdown, isolating safety. As to what that means for the lockdown, that is for the chief health officer.”
The decision will be made in two days regarding the extension and that could see the Aussie dollar move back below the 2021 lows seen last week. The UK is also seeing a risk of its reopening being stalled by the latest virus variant. The recent reopening has been a boost to the services sector, but the hard work could be derailed if politicians take a snap decision to increase the lockdowns.
The AUDGBP is bouncing to 0.5455 but the lockdown pressures persist for both countries.
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