GBP AUD Slumps on Johnson Report

GBP AUD Lower Despite Confidence at Pandemic Lows

The GBP AUD exchange rate was -0.50% lower on Monday as the report on Boris Johnson’s parties was released. The damage was limited but suggests that the police are dealing with up to 12 gatherings. Aussie PMI data showed a shrinking private sector and that will be a blow ahead of the RBA rate meeting today. UK house price sales are also due.

The GBP to AUD rate found resistance at the 1.9150 level and has retreated to the 1.9015 price range as traders bailout ahead of the BoE.

Aussie manufacturing PMI drop leads into RBA meeting

Aussie manufacturing PMIs on Monday showed that Australia’s private sector shrank for the first time in four months, according to Flash PMI data.

Private sector output and demand dropped due to growing Omicron infections and hiring ground to a halt. Meanwhile, backlogged work continued to build while input price inflation rose.

The IHS Markit Flash Australia Composite Output Index fell from 54.9 in December 2021 to a five-month low of 45.3 in January. This marks the first contraction for Australia’s private sector following three consecutive months of growth.

The numbers will be embarrassing for Treasurer Josh Frydenberg, who said at the weekend that the Aussie economy had the strongest bounce of large nations.

Private sector firms saw business activity shrink with operations disrupted, which also saw manufacturing sector orders stalling as demand for services was badly affected by the virus variant spread.

Tomorrow will first see home loans data released but that is set to stagnate at last month’s 0.1% figure. The market will then get the latest updates from the Reserve Bank of Australia’s interest rate meeting.

The RBA is expected to hold its cash rate at 0.1% on Tuesday, while fully ending the A$4 billion per week of bond purchases, according to a survey of economists. Analysts are now expecting the first rate hike in around six months’ time, which is well ahead of previous forecasts of 2023 and the bank’s estimate of 2024.

Sue Gray report lands but police report will have more bearing

Number 10 has said it will publish further details of Sue Gray’s investigation into parties in Downing Street after the Met Police has completed their own inquiry.

A limited “update” of Gray’s investigation was published by the Cabinet Office on Monday and there are details of twelve events being investigated by the Met but redacted in the report.

The Prime Minister Boris Johnson was apologetic in the commons, but the investigations could end up costing him his job. The pound sterling was lower after the news of the report. One event was said to be “mistakenly” attended by Chancellor Rishi Sunak, which would be interesting as he is the current favourite to replace the PM.

The pound sterling versus the Aussie dollar awaits Nationwide housing data from the UK tomorrow, with another rise to 10.8% seen annually. That will be the last meaningful data until the Bank of England meets on Thursday, with traders anticipating another interest rate increase to 0.50%. The bank has not raised on back-to-back occasions since 2004 and there is potential for them to disappoint traders, as they did back in November.

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