The AUDGBP exchange rate started lower for a sixth day of seven, but the move lower has been limited. The pair is -0.08% on Monday, with only 40 pips being the loss since mid-December. Traders have been hesitant to push the pair either way as they see high virus case rates in both countries and a threat of further restrictions.
The AUD v GBP was trading at 0.5362 with the next support level at 0.5275.
Australian bond traders see three rate rises in 2022
Australia’s reserve bank could raise interest rates up to three times, according to pricing in the bond markets. That won’t please Philip Lowe, the bank’s Governor, who has said 2024 will be the first.
Despite the US and UK central banks adopting a more hawkish tone, Lowe has remained stubborn on tackling inflation. However, some analysts are less bullish.
“I think they’ll be forced to move earlier than they have suggested,” AMP Capital chief economist Shane Oliver said.
“We expect rate hikes coming in November of next year. So, they’re a way off but the bank will ultimately be driven by data and forecasts.”
“If we continue to see stronger economic data in the job market, wage growth and inflation, then I think they’ll bring forth the timing of the cut,” he said.
“And I think next year, we’ll probably see stronger economic data, ultimately supporting a move on rates around November.”
The Governor and the Australian treasurer have both said that the economy will not be derailed by the Omicron variant, which would support a stronger economy.
“Inflation has increased but, in underlying terms, is still low, at 2.1 per cent,” Lowe said recently.
“A further, but only gradual, pick-up in underlying inflation is expected. The central forecast is for underlying inflation to reach 2.5 per cent over 2023,” he added.
UK and Australia seeing record case numbers but still open
Australia and the UK are both seeing high case numbers for the virus variant, but it is still shown to be milder.
However, one problem is that higher numbers are having to isolate and that could affect the economies.
UK ministers return from their recess this week and will review the UK’s restrictions on Wednesday, but some have remarked over the weekend that any changes are unlikely based on the latest data. The British pound has been supported by those comments, but the situation won’t be helped by freezing temperatures being forecast for the next three days in the country.
Chris Hopson, chief executive of NHS Providers, which represents the health trusts, said the country faces a “crucial” few days with NHS staff absence hitting critical levels.
He said that staff are working “flat out” and that the NHS was under “arguably more pressure” than the same period last year.
The AUD v GBP is edging lower as the year begins, but traders are looking for any change to the growth outlook, driven by government decisions.
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