AUD GBP Drops on RBA Minutes and UK Jobs Data

AUD GBP Flat with Aussie Retail Sales Data Due

The AUD GBP exchange rate was lower by -0.50% on Tuesday after the latest RBA minutes held a dovish path on rates. The central bank’s Governor Philip Lowe also said that inflation should be subdued. The pound was supported by UK employment figures which showed resiliency despite the end of furlough.

The AUD GBP exchange rate was trading at 0.5445 and inflation data today for the pound could be another catalyst.

RBA minutes and Lowe speech weigh on Aussie dollar

The Australian dollar was waiting on the latest Reserve Bank minutes and a speech from the Governor to continue its recent gains.

Instead, it got another does of dovishness on both counts with the minutes of the November 2021 Monetary Policy Meeting repeating that policymakers are prepared to be patient.

“QE continuation at the current pace seems appropriate and the cash rate to remain at its current level until 2024 or until wage and inflation criteria are met,” the report said.

The RBA upgraded its economic forecast to 5.5 per cent in 2022, and the minutes included previous commentary that a pathway for interest rate hikes in 2023 was “plausible”.

The board said the outlook for inflation was less certain as global supply constraints added extended upward pressure on prices, which could be pushed onto consumers.

Higher prices could lead to workers asking for higher wages to keep up with inflation. The bank is maintaining a desire for inflation to remain “sustainably” within its 2-3 per cent target band.

“However, it was also possible that global goods demand would ease over the coming year or so, around the same time that more goods supply came online. This could see price pressures in global goods markets dissipate and lead to lower inflation outcomes in Australia,” the minutes said.

UK employment boosts the pound despite furlough end

The latest UK jobs figures from the ONS showed unemployment dropping more than expectations despite the end of furlough.

Sterling was strong after the number of staff on payrolls in October rose to 0.8% above the pre-virus levels of February 2020, before the virus hit, and increased by 160k on the month.

“Now that today’s labour market data shows that hurdle has been cleared, we think the Bank of England has the green light for interest rate lift-off at their December meeting,” said analysts at JP Morgan Asset Management, said.

A bank policymaker had said on Monday that he was cautious over the economy when it comes to rate hikes. Speaking at a Resolution Foundation event, Johnathan Haskel said the economy was “firing on two cylinders” and that it’s “too early to declare success” in getting those on furlough back into work.

The latest figures out on Tuesday could be the extra confidence boost needed to lift the interest rate in the UK with the next meeting coming in mid-December. Attention will now turn to the day ahead with inflation figures for the UK and a higher number could supercharge rate hike bets once again.

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