AUDGBP Bounces Back to 0.5300 Ahead of RBA

AUDGBP Bounces Back to 0.5300 Ahead of RBA

The AUDGBP exchange rate was higher on Tuesday ahead of the RBA interest rate meeting and sentiment. After the pair opened at new yearly lows below the 0.5300 level. This is an important week for the pair with the Australian Reserve Bank meeting on Tuesday, followed by the Bank of England on Thursday. Both banks will hold rates steady at record lows and traders will be looking for updates on the future rate and stimulus plans for both sets of policymakers.

The AUD to GBP pair trades at 0.5280 with the Aussie dollar struggling due to the Sydney lockdown.

China can’t resist another dig at Australia

After strained relations between the two countries in recent times, China has enjoyed another dig at the Australian government after the rapid deterioration in their coronavirus efforts.

The state-run China Daily took a shot at Australia’s he botched vaccine rollout last week with a harsh opinion piece, while the Global Times shone a light on what it said was Canberra’s hypocrisy in applying population controls over the virus.

The Morrison government was criticized by the Times for its “double standards” in dealing with the virus.

China was previously criticised by Australia over its extreme measures to control the virus by restricting residents’ movements and freedoms. That doesn’t look smart with Sydney in lockdown and the military patrolling the streets

For the Aussie dollar versus the pound, the comments are another reminder that the trade relationship between the two is strained, even if China needs Australia’s ore exports to fuel its own growth.

Reserve Bank under pressure to provide updates

The day ahead sees Australian housing data with home loans and building permits, but the headline event is the latest RBA interest rate meeting. The Aussie economy will also see the release of retail sales on Thursday, but Philip Lowe and the Reserve Bank will drive the AUD v GBP before then.

The RBA may have to make a u-turn after last month deciding not to roll over its current bond purchase plan from the April 2024 bond into the November bond. The bank decided not to which was a slight hint of tightening policy. That may be short-lived, however, with this month’s discussion being the extended lockdown in Greater Sydney. The lockdown was recently extended to Aug. 28 and the area accounts for over 20% of the Australian population. The measures are likely to cause the economy to contract in Q3, with the potential for a bounce in Q4.

Last month the RBA said: “Members acknowledged that an argument could be made to retain the pace of bond purchases at $5 billion per week, given that economic outcomes were still well short of the Bank’s goals for inflation and employment. However, the economic outcomes had been materially better than earlier expected and the outlook had improved.”

It’s possible with the recent economic threat that the bank could reverse its decision on the April bond, or simply front-load the current scheme with higher monthly purchases.