GBP AUD Mixed After Surprise Bank of England Rate Hike

GBP AUD Steady After Leadership Fears Cool

The GBP AUD exchange rate was slightly higher on Thursday after the Bank of England surprisingly hiked interest rates. The market had expected a rate hike last month and were disappointed. This time around analysts were expecting the bank to hold steady at 0.1% and they got a surprise lift to 0.25%.

The GBP AUD exchange rate was trading at 1.8545 but the initial move was a low near 1.8520.

Westpac consumer confidence remains positive

Consumer confidence in Australia was still in positive territory in November, according to the latest survey from Westpac Bank on Wednesday. The bank’s index for sentiment slipped 1.0 percent to a score of 104.3 – staying above 100 and in the green.

There was a clear difference in survey responses between the states hit hardest by government lockdowns. Both NSW and Victoria posted large drops of 3.6% and 3.5% while sentiment was up in Queensland WA and SA.

Elsewhere, treasurer Josh Frydenberg has said that employment will drop to under 5%.

The Treasurer, Josh Frydenberg, will reveal in Thursday’s mid-year budget update that Australia’s unemployment rate will fall comfortably below 5% next year as the economy continues to rebound.

After months of volatile unemployment numbers due to the lockdowns and falling participation rates, the mid-year economic outlook will forecast the unemployment rate to drop to 4.5% in the June quarter next year. That is lower than the 5% unemployment rate forecast for June 2022 in the May budget.

The treasurer was against further lockdowns, saying:

“I have a very clear message to the premiers – their actions in response to Omicron must be proportionate to the risk,” Mr Frydenberg said.

“They must show compassion. They must show common-sense.”

The Treasurer also hit out at Premier Palaszczuk for her decision to quarantine everyone on two flights for 14 days after two passengers had tested positive, before she reversed the decision.

Bank of England hikes rates in surprise move

The Bank of England surprised markets by raising its main interest rate to 0.25% as inflation pressures jumped in the UK.

Many economists had expected the bank to keep the rates at 0.1% due to a recent surge in virus cases. However, with inflation at its highest level since 2011, the BoE decided to act to help bring the cost of living back under control.

The bank said inflation was expected to hit 6% in April, which is three times over the bank’s target. The BoE voted 8-1 to raise interest rates.

In the UK, a third football match was cancelled with the recent virus variant issues and SAGE was calling for another lockdown.

“Accordingly, we now call for an immediate circuit break to then enable limited mixing from the 25 to 28th December. All measures should be re-evaluated over that period to determine what needs to happen after Christmas.”

The GBP v AUD has resistance ahead at 1.8620 with support at the 1.8400 level.