The AUD GBP exchange rate is lower by -0.18% as the pair awaits the latest consumer confidence numbers from Westpac. The bank also weighed in on the RBA’s recent chatter on rates and warned of lower commodity prices.
The AUD GBP exchange rate was trading at 0.5415 ahead of the Westpac consumer data.
Australian dollar correction close to completion say Westpac
Westpac has said that Reserve Bank of Australia denial of a potential 2022 rate increase has undermined yields and triggered an Australian dollar correction.
Alongside that, Commodity prices have declined, but Westpac still expects that the fundamentals will support the Aussie dollar, especially with the vaccination program making headway. Westpac notes that the RBA has pushed back aggressively on market expectations surrounding an interest rate increase in 2022.
“While dropping the Apr 2024 yield target, Lowe flatly declared that “the latest data and forecasts do not warrant an increase in the cash rate in 2022.”
The RBA rhetoric will add short-term downward pressure on yields, but Westpac expects there is only limited scope for a further decline in yields, especially if there is stronger economic data with the reopening.
“This probably still has a way to run, though any further signs of economic rebound in the week’s key data will limit the fall in yields.”
Westpac also pointed to commodity prices which have fallen and said that this process will continue and will have a significant impact on the Aussie trade balance. But the bank expects trade to buffer the Aussie dollar for some time.
The bank notes; “Of course trade surpluses continue, so Australia’s external position still provides insulation for the Aussie.”
Westpac releases its consumer confidence figures today with the last number being 104.6 with the recent lockdowns being an important factor.
UK Prime Minister under heavy fire from all angles
The British Prime Minister is finding himself at the centre of growing controversy and that could be a weight on the pound sterling.
The Conservatives have now lost their lead over Labour in recent days as allegations of sleaze start to take their toll on the Government. Polling by IpsosMori published on Monday has said that Boris Johnson’s personal ratings have plunged to their lowest level since he arrived at Number 10.
The latest survey put the Conservatives on 35%, down four points from September, Labour are unchanged on 36%, while the Green party are up five points to 11%, and Liberal Democrats remain on 9%. Sadly, for the government, the polling was largely done before the Owen Paterson scandal, meaning the Tory ratings are likely to drop further.
The Prime Minister has also been dealing with the French fishing spat and Northern Ireland protocol issues and the latest sleaze issue is another headwind for the pound. Investors hate political instability, and this will continue to have an effect.
Despite the recent rally and the Bank of England’s slow approach to rates, the RBA is determined to move slower and the Aussie dollar may take a breather.
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