AUD GBP Looks to Data to Continue Recovery

AUD GBP Looks to Data to Continue Recovery

The AUDGBP exchange rate was lower for a second week, but the price action suggests a pause. This week will have economic data for the Australian and UK economies and the Aussie dollar will look to continue the recent recovery from lockdowns. Tuesday has RBA minutes and a speech from Governor Lowe, alongside the latest UK employment figures.

The AUD to GBP exchange trades at 0.5460 and has resistance ahead of 0.5600.

Reserve bank minutes will set the tone for the Aussie dollar

The latest Reserve Bank minutes on Tuesday will have a bearing on the AUD v GBP early in the week.

The bank’s governor Philip Lowe will also speak on that day but will likely continue the dovish tone. Traders have stepped up their aggressive bets for an earlier rate hike in recent weeks, but the bulls were dealt a blow by last weeks’ jobs data.

A jump in the unemployment rate to 5.2% with markets expecting a figure of 4.8%.

“The jobs numbers buy the central bank a little more time before we get to the 4% unemployment rate that they think is required for wages growth,” said Chris Rand at Yarra Australia bond fund.

However, some still expect rate hike bets with JP Morgan economists saying:

“The way YCC was dropped really damaged the credibility of the RBA. That really opens it up for markets to price in data expectations rather than trust the central bank’s guidance.”

The bank has insisted that rates won’t rise from the 0.1% floor until 2024 but traders have questioned that with recent inflation increases. The RBA has always used the jobs market as a focus and does not expect imminent wage inflation.

UK economy awaits jobs and inflation data

The UK economy has its own employment update this week with Tuesday seeing jobs numbers.

Official figures are expected to show a 180k increase in jobs after last month’s 235k improvement. The unemployment rate is expected to dip to 4.4% from 4.5%.

Wednesday will also be important for the UK with a move from 3.1% to 3.9% expected. That is in line with BoE expectations for a near-term move to 5%.

There is also political risk for the pound sterling with the Article 16 issue which threatens to reignite Brexit once more. Article 16 is a clause related to the Norther Ireland hard border issue. The UK has threatened to trigger the clause with some saying it would happen after COP 26.

The European Union has threatened to retaliate if the UK goes ahead and could even attempt to cancel the previous Brexit deal which would have repercussions for the British Pound after previous weakness in the currency during the talks.

There has been some recent cooling of threats from the UK government and Monday will likely bring some further clarity with COP26 finished.

The beginning of the week threatens to be the most volatile for the AUD v GBP currency pair.

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