The GBPAUD exchange rate could be driven this week by Tuesday’s Reserve Bank of Australia and UK employment data events.
GBPAUD – Daily Chart
The GBP v AUD price is trading just below the 2 level and that is important as it was the high in 2023. Coming data from the two economies could see this as a breakout, or correction barrier.
The RBA interest rate decision and press conference starts at 11:30am HKT. Australia’s central bank is set to cut interest rates for the first time in four years despite inflationary pressures from global trade tariffs.
A majority of economists in a Bloomberg survey expect the Reserve Bank of Australia (RBA) to finally start easing today with a 25-basis-point reduction in the cash rate to 4.1%.
That would be the RBA’s first cut since November 2020 and could be a boost for Prime Minister Anthony Albanese, who needs to overcome weakness in the polls.
Money markets are pricing in an 85% chance of a cut, but gains in consumer spending, aided by tax cuts and government subsidies, may convince policymakers to stay cautious.
The RBA’s policy has been similar to major economies as it didn’t tighten as aggressively in 2022 and 2023. The board attempted to hold onto labour market gains while bringing inflation back to target, but that has drawn criticism and many will welcome some rate relief. Price pressures are reducing at a quicker pace than the bank anticipated, according to data.
“If I were still at the RBA, I’d struggle to write a board paper justifying rates on hold given how much inflation has come down, given the likely near-term trajectory and given how much the RBA is going to have to revise its forecasts in the new round,” said Luci Ellis, chief economist at Westpac Banking Corp.
“It’s hard to know how much they’ll pivot their language,” Ellis said. “However, this is not a big cutting cycle. We really think they’ve got at most 100 basis points”.
Westpac’s Ellis and Commonwealth Bank’s Gareth Aird, see a 20% probability the RBA takes no Tuesday action. Another factor for the RBA is that the Australian dollar has fallen more than 5% since the US election in November, leading to price increases for imports.
On employment, Australia’s jobless rate stayed low in December while vacancies remain high, suggesting unemployment could fall further.
In the United Kingdom, employment data at 3pm HKT is expected to show an increase in unemployment to 4.5% from 4.4%. Last month’s +35k jobs may not be better as the economy struggles.
The GBP v AUD will look for direction around the 2.000 level which may come from the RBA decision and statements.
