GBP AUD Higher Ahead of Bank of England Rates

GBP AUD Higher Ahead of Bank of England Rates

The GBP AUD exchange rate was higher on Tuesday for a fourth-consecutive day as traders await the Bank of England rate meeting tomorrow. Strong employment figures were released for the UK showing a record jump in staff added to payrolls. The pound sterling still faces headwinds and could see further damage with the government’s rule which faced a vote on Tuesday.

The GBP AUD exchange rate was trading just below 1.8600 and could falter if the BoE take a dovish stance.

Johnson government faces 77 rebel revolt in vote

Tuesday saw the government vote on Plan B restrictions and the Johnson government faced a 77 Tory member revolt. The new curbs were set to be introduced, due to Labour party support, but it also highlights the pressure the PM is under as some predict he will be gone soon.

That adds some political instability to the pound sterling and traders also looked beyond Tuesday’s employment figures with further damage coming from the new rules.

The Office for National Statistics (ONS) has said there is “still no sign” that the end of the furlough scheme in September has affected the jobs market. The number of UK workers on payrolls rose by 0.9% in the three months to November to 29.4 million.

The unemployment rate fell once more, to 4.2%, which is the lowest since spring of 2020.

The ONS said the number of people employed sits at 424,000 above levels seen before the pandemic.

The figures failed to give the pound sterling a lift versus the Australian dollar as Plan B restrictions come into force. The strong spread of the new variant already has traders fearing further curbs.

Tomorrow sees the Bank of England interest rate meeting and the IMF said the bank faced a tricky task in removing stimulus.

The group also urged the BoE to avoid an ‘inaction basis’ in raising interest rates to combat inflation, which it said could hit 5.5% next year.

The BoE should also “take the earliest opportunity to put the quantitative tightening program onto a pre-programmed course and for the Bank to give guidance on the framework to be used to manage the process back towards the steady state balance sheet”.

Australian budget due tomorrow from treasurer

The Australian treasurer Josh Frydenberg will hand down the country’s budget tomorrow which will add further volatility to the AUD v GBP.

He is expected to say that the budget position is A$100bn better off and Deloitte’s Chris Richardson said:

“It’s a pretty remarkable result, but it comes down to the basic thought that the Australian economy, like the world economy, was never broken, it was closed down”.

“And if you can get ahead of COVID, then you can open up, the economy comes back, and if the economy comes back, the budget comes back.”

Westpac Consumer Confidence was also due out for the Australian economy and that was expected to improve after it had slumped from April with the recent lockdowns.