GBP AUD Looks for a Push Higher from RBA

GBP AUD Looks for a Push Higher from RBA

The GBP AUD exchange rate was looking for another push as the pair awaits an RBA interest rate decision. The RBA has been urged to drop politics and raise rates during the election campaign, rather than after it, but may disappoint the hawks. Manufacturing data was strong down under as the country bucks the worst of the Ukraine war. Attention now turns to the interest rate outlook which will be clearer for the pair after the RBA update.

The GBP to AUD touched the 1.1800 figure ahead of the RBA.

Australian manufacturing higher in April, S&P says

The manufacturing sector in Australia continued to expand in April, and at a faster rate, the latest survey from S&P Global showed on Monday with a manufacturing PMI score of 58.8.

That’s up from 57.7 in March and it moves further above the boom-or-bust line of 50 that separates expansion from contraction. This marked the twenty-third consecutive month in which the sector has grown.

Manufacturing output in Australia rose at a faster pace in April, supported by strong new orders growth as better market conditions underpinned an increase in demand. Foreign demand saw renewed growth following three consecutive months of contraction with the easing of border restrictions in some trading partner nations supported the change.

As a result of higher demand and output, employment levels rose at a faster pace in April. That said, panelists continued to reflect difficulties in acquiring skilled labor.

Reserve bank ‘promise’ is ‘absurd’ economist says

Economist Andrew Stone said that the Reserve Bank will most likely raise interest rates, which would be a “huge indictment” of the bank in both a short- and long-term sense.

“If they do, they will … have broken a promise that they made that they were going to keep rates effectively at zero right though until 2024,” Mr Stone told Sky News.

Mr Stone said making that promise at the time was an “absurd thing to do”.

“Indeed, where they’ve held policy rates for the last 18 months have also been quite inappropriate … notwithstanding the pandemic.”

A host of banks have predicted that the RBA will launch its first rate hike in 11 years.

“We now expect the RBA to hike by 15bp. Inflation pressures have momentum and have broadened. A cash rate target of 0.1% is inappropriate against this backdrop,” ANZ said.

“What was shaping up to be just a position-setting meeting ahead of an actual hike later this quarter is now looking likely to deliver not just a rate hike, but perhaps a 40bp one together with a strong nod towards front-loading at subsequent meetings. This follows a much higher-than-expected inflation reading for 1Q22. The market is already heavily pricing in rate hikes from the RBA so the market reaction may be modest,” analysts at ING added.

The current government will not want to see rates increased ahead of the election in around three weeks, but some have urged the RBA to show its independence from politics.