GBP AUD Steady After Aussie ‘Taper Tantrum’

GBP AUD at Risk of Further Losses Ahead of Data

The GBP AUD exchange rate was slightly higher, but the Aussie dollar still has the advantage after traders repriced their interest rate expectations for the Australian economy. There was a further panic in Australian bond markets after the central bank unexpectedly did not offer to buy the April 2024 yield target bond.

The AUD GBP exchange rate is trading at 1.1828 and the pair will look ahead to the Bank of England rate meeting next week.

Australian April 2024 bonds explode higher on ‘taper tantrum’

Australia’s bond market saw more turmoil after the central bank refused to buy the April 2024 yield target bond.

The yield on the 2-Year bond exploded higher, doubling in the matter of minutes from 25bps to 50bps as the central bank’s 0.1% yield curve control was executed. The market saw the biggest one-day surge in 2Y yields since the Lehman Brothers crisis.

Heading into the Thursday session, markets expected the RBA to buy the April 2024 bond in order to contain the recent strength in yields, which had moved well beyond the central bank’s official 0.1% YCC barrier. However, the central bank shocked the market when it decided not to buy any of the target bond. This led to traders believing that the bank’s Yield Curve Control efforts could be over.

The decision will increase expectations for Governor Lowe to consider making an earlier rate hike.

Zerohedge said:

“But it will reprice the entire short-end of the Australian yield curve, which will soon pancake in preparation for the coming inversion, which in turn will lead to shockwaves that will be felt in Europe and the US as soon as tomorrow, pouring even more fuel on the recent short-end fire that today sent the US 2Y above 50bps, and was at 0.52% at last check moments ago.”

UK households to be punished in ‘high tax, big state economy’

A predicted rise of £3,000 in tax bills for UK household by the mid-2020s will herald an end to the era of low tax conservatism in Britain, experts have said after Rishi Sunak’s Autumn budget.

The Resolution Foundation said that Sunak’s plans to increase state spending will see the UK moving towards a “new high tax, big state economy” as pressures mount on the battered public finances.

By 2026-27, tax as a share of the economy could rise to its highest level since 1950, a £3,000 increase for every household since Boris Johnson became Prime Minister, according to the foundation. The recent hike in taxes, including national insurance, and an increase in benefits is set to squeeze middle class incomes for years to come.

The forecasts came alongside similar claims from the Institute for Fiscal Studies, where Paul Johnson warned that the UK’s tax burden could soar.

The GBP v AUD is trading at 1.8280 but could head lower to 1.8200 before it finds support from pound sterling bulls.
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