AUD GBP Gets a Lift Ahead of RBA Rate Update

AUD GBP Higher Again Despite WA Shutout

The AUD GBP exchange rate opened the week with a 0.36% gain as traders await the Reserve Bank of Australia rate decision. The bank will undoubtedly leave rates at 0.1% but there is scope for a change to stimulus plans.

The AUD GBP exchange rate started the week at 0.5281 ahead of the RBA meeting.

Reserve bank takes the stage for the AUD v GBP

The Australia dollar versus the pound has UK GDP on Thursday but the Reserve Bank of Australia interest rate decision will drive the pair until then.

Markets see rate liftoff in May, well ahead of Governor Philip Lowe’s expectation of 2024, highlighting the disconnect between investors and policy makers.

“We expect the RBA to remain patient,” said Scott Solomon, portfolio manager for T.Rowe Price. “The omicron news is just the latest example of how hard this environment is on policy makers. Every time there appears to be significant clearing ahead, a new problem pops up making it difficult to pivot.”

Traders will also be looking at tomorrow’s statement for a change in the RBA’s bond-buying program which is set for a review in February 2022.

The review is widely expected to see the RBA reducing the weekly pace of purchases from the current A$4 billion. The next few weeks will see the US, UK and European central banks meeting and that could lead to more action with the RBA happy to sit behind other banks.

The Reserve Bank of New Zealand’s Chief Economist gave a good insight into the virus variant, saying:

“…we are getting used to the idea of living with Covid, so Omicron, I don’t think it changes the outlook, it probably just reinforces the downside risks we saw in the projections.”

SA premier ‘very concerned’ by mild virus, UK inflation risk

Despite scientists saying that the latest virus variant was mild, the SA Premier Steven Marshall has said he is ‘very concerned’.

Marshall said he was already being advised to close the border yet again, and said:

“We are very concerned about Omicron. We’re meeting on a very regular basis, and we don’t take any option off the table.”

The Australian government shut down the country with only a small amount of cases in the past and the Aussie dollar is at threat again. Despite case numbers rising from the variant, there has been nothing to suggest it is worse.

The pound sterling was unable to capitalize on stronger construction activity with the fastest pace seen in four years, driven by commercial activity.

Meanwhile, the Bank of England’s Ben Broadbent warned that UK inflation could be ‘comfortably’ over 5% next spring, when energy bills rise again.

“In the spring of next year, when the next rise in the Ofgem cap on gas and electricity bills comes through, it will probably climb comfortably through 5%, a long way north of the MPC’s 2% target,” he said.

Research Springboard has also reported a 3.8% drop in footfall at retail outlets in regional cities last week. That could be driven by the virus variant, but shoppers were seen starting earlier than usual this year over fears of shortages.

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