The AUDGBP exchange rate trades slightly higher on Monday but the pair may be quiet for the next few days ahead of the Bank of England’s latest interest rate decision on Thursday. Last week saw strong employment figures for the Aussie economy, while the latest UK inflation figures could pressure the BoE to act on monetary policy.
The AUD to GBP rate was trading at 0.5415 on Thursday after breaching the 0.5422 yearly lows.
Aussie labor market will test RBA resolve
Australian employment numbers blew past market expectations last week as unemployment fell to pre-pandemic lows. The latest jobs number was a surprise that will test policy makers’ commitment to keeping interest rates at historic lows.
The unemployment rate in Australia dropped to 5.1%, from 5.5% in April, which is a rapid recovery from the highs of 7.5% last July when the government lockdowns pushed the economy into recession.
Expectations for the AUD v GBP will fluctuate now with the central bank tightening outlook.
The UK saw inflation rise to 2.1%, which is above the Bank of England’s target and is the first time in two years that prices have heated up to that level.
The RBA had said there was no intention to raise the 0.1% cash rate until inflation is back in the 2-3% range and the Bank of England are likely going to move first with rates.
New virus cases dominate in UK and Australia
The UK and Australia are both seeing a rise of new virus cases which threatens to derail the economic rebound story.
Four new coronavirus cases were announced on Monday and that takes the total number of infections in the NSW state cluster to 11. This is in stark contrast to the UK where 10,000 cases are seen in a day.
Victoria’s virus response leader has said that the state will be forced to halve its administration of first-dose Pfizer shots because of a supply shortfall. Jeroen Weimar said that the state had already reduced its first dose allocation by 30k in the week to accommodate an increased number of second doses.
“We are all frustrated that there is not more vaccine around,” Weimar said on Monday. In Australia, Melbourne has seen an easing of virus restrictions after the previous lockdown was introduced for two weeks. South Australia will also start re-introducing international students, after a quarantine hub was approved.
Peter Switzer said on Sky News that the slow pace of the vaccine rollout may actually turn out to be a “positive” for the nation’s economy with the closed borders forcing Australians to spend their money at home. “In many ways the opening of our borders is going to be a very important step forward for the economy,” he said. “You’ve got to remember, something like $65 billion is spent by Australians every year when they go overseas. That money is here and, in a sense, it’s creating a lot of stimulus for the economy.”