GBP/AUD Exchange Rate Buoyed as Sunak to Defer Significant Tax Increases in March Budget

GBP/AUD Exchange Rate Firms on Budget Rumours  

The Pound to Australian Dollar (GBP/AUD) exchange rate is edging higher this morning, amidst reports about the contents of Chancellor Rishi Sunak’s upcoming budget. 

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7894, slight up from this morning’s opening rate. 

Pound (GBP) Bolstered by Rumored Deferring of Tax Hikes 

The Pound (GBP) is ticking higher this morning, on the back of reports that Chancellor Rishi Sunak’s upcoming budget will see the Chancellor defer plans for significant tax hikes, in favour of offering more fiscal support to Boris Johnson’s cautious reopening of the economy. 

The Prime Minister confirmed on Wednesday that his government will take a ‘data not dates’ approach to easing lockdown measures, signalling that the cautious reopening of the economy could result in the hospitality sector facing extended restrictions. 

In light of this cautious path out of lockdown the budget is now expected to contain more measures to help protect jobs, with a likely extension of the furlough scheme being a major component. 

The news was welcomed by GBP investors, who hope that more support from the Chancellor will help to reinforce to the UK’s economic recovery later this year. 

Australian Dollar (AUD) Stabilises on Upbeat Jobs Figures 

Meanwhile, the Australian Dollar (AUD) is holding its ground this morning following the publication of Australia’s latest jobs report. 

According to data published by the Australian Bureau of Statistics (ABS), domestic unemployment fell from 6.6% to 6.4% in January. This was the lowest unemployment rate since April last year and also outpaced expectations for a more modest fall to 6.5%. 

Diana Mousina, senior economist at AMP Capital, commented: 

‘This means that close to 93% of jobs lost due to COVID-19 at the height of the national lockdown — April [and] May 2020 — have now been regained. This is an impressive rebound. 

‘We expect jobs growth to be positive from here as the economy ‘normalises’ but employment growth is likely to be slow, especially after the end of the JobKeeper scheme.’ 

However slightly dampening the figures was the weaker than expected job growth, with the upside in the ‘Aussie’ also being tempered by predictions that unemployment still remains too high for wage growth to accelerate at any meaningful rate. 

GBP/AUD Exchange Rate Forecast: UK PMIs in the Spotlight 

Looking ahead to tomorrow’s session, the main catalyst in the Pound to Australian Dollar exchange rate will undoubtedly be the publication of the UK’s latest PMI releases. 

February’s preliminary figures are highly likely to report that economic activity in the UK’s private sector continued to contract, with another weaker-than-expected print likely to sap Sterling sentiment tomorrow. 

Adding additional pressure to GBP exchange rates may be the release of January’s domestic retail sales figures, where economists are forecasting a dramatic slump in sales growth. 

In contrast, the publication of Australia’s own retail sales figures could prove to be a boon for the ‘Aussie’ in overnight trade, on the expectation that sales growth will have rebounded sharply in January. 

Matthew Andrews

Contact Matthew Andrews