The Pound to Australian Dollar exchange rate bounced up on Tuesday morning as the Australian Dollar’s bullishness slowed and the Pound was bolstered by an increase in 2016 consumer prices. GBP/AUD had previously fluctuated with a downward bias in the region of a 2 ½ year low, but recovered slightly to 1.6800.
Sterling (GBP) Given Foothold by Decent Inflation Figures
After investors sold the Pound on Monday in anticipation of a testing week of bearish ecostats, Tuesday’s Consumer Price Index (CPI) report appeared to ease some market anxieties, allowing Sterling to recover from its worst levels.
Monthly inflation came in at -0.1% as forecast, but the year-on-year inflation for July improved from 0.5% to 0.6%, higher-than-expected.
This figure boosted the Pound slightly on Tuesday, giving some investors a reason to buy the currency from its cheapest levels ahead of the week’s remaining UK stats.
Sterling’s advances were muted by other news surrounding the figure, such as the drop in Pound value making import costs for manufacturers soar.
Australian Dollar (AUD) Rally Ends, RBA Minutes Weigh on Currency
The Australian Dollar’s latest bullish run appeared to slow on Tuesday morning as the ‘Aussie’ faced multiple obstacles.
Firstly, it appeared that prices of iron ore had begun to drop again after last week’s rally. This has caused demand for the iron ore-correlated ‘Aussie’ to wane slightly.
Another key factor was the publication of the Reserve Bank of Australia’s (RBA) latest meeting minutes. Released during Tuesday’s Asian session, the minutes slightly undermined the Australian Dollar due to the vague tone of bank policymakers.
RBA officials gave little away about what August’s rate cut meant or what would follow for monetary policy in the short to long term, causing investors to make their own interpretation.
GBP/AUD Forecast: Thursday Trading to Trigger Pound Shifts
Sterling will likely continue fluctuating near its current levels until Thursday, as July’s inflation figures did not reveal any definite post-Referendum trends. Analysts predict that the post-Brexit impact on consumer prices will become more apparent in the mid to long term.
This pattern is also likely for Britain’s employment results, and Sterling is unlikely to make any considerable movement on Wednesday unless July’s UK jobless claims report surprises markets.
As for the Australian Dollar, it could continue to fluctuate on the downside ahead of Thursday’s session due to the RBA’s vague report and concerns from some analysts that iron ore prices could fall as low as US$40 by the end of 2016.
Thursday’s session will be the one to watch for the GBP/AUD exchange rate, with Australia’s July employment report due for publication during the Asian session and Britain’s July retail sales figures due during the European session.
As retail sales are more likely to show immediate trend shifts as a result of the Brexit vote, this figure in particular could be the catalyst for the week’s biggest Sterling movement.