The GBP AUD exchange rate was slightly lower on Tuesday as markets await the latest UK inflation figures. That will give the pair a direction after some sideways movement to start the week. The RBA Governor provided support for the Aussie dollar by signalling the possibility of a 50bps rate hike at the July meeting of the central bank. The UK is also reeling from large rail strikes in the country.
The GBP to AUD rate was trading at 1.7600 ahead of the economic data.
Lowe boosts outlook for Aussie rates in latest speech
“Be prepared for more interest rate increases,” warned the RBA Governor this week. Markets are trying to predict the exact path of borrowing costs.
The latest meeting minutes of the Reserve Bank were a little light on the future plans. They were more of a defence for the latest hike.
Mr Lowe emphasised that they were not on a pre-set path, explaining that how fast they increased rates and how far they needed to go will be guided by the incoming data and the board’s assessment.
“A lesson from the 1970s is that if an inflation shock shifts people’s expectations about the ongoing rate of inflation, it becomes harder to reverse,” Lowe added. Markets may already be past that point of no return as inflation is a hot topic everywhere.
Despite higher inflation, the RBA leader played down recession fears, saying:
“Australia has a lot of positives, so we don’t see a recession on the horizon, but the last two years, if it has taught us anything, you can’t rule anything out. Fundamentally, we are strong and the position of the household sector is strong and firms want to hire people at record rates.”
UK rail strike causing stress for workers, inflation ahead
Inflation is the driver of what rail bosses are calling the largest strike in the UK’s history for the train network.
Up to 40,000 workers will take part in the union action that left stations empty on its first day. Last-minute talks between unions and operators failed to resolve the dispute and continued action will take place. The postal service is also looking at similar action with a vote due on pay increases.
Wednesday sees the release of the latest inflation figures for the UK and that will add further discomfort for policymakers if it shoots higher than expectations.
Analysts are expecting a rise of 0.1% in the yearly figure to 9.1% but there is potential for a higher reading with recent price pressures.
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