GBPAUD Forecast UK Inflation Rate Forecast Extends Pound to Australian Dollar Exchange Rate Losses

Concerns about Returning UK Wage Squeeze Drag GBP/AUD Exchange Rate Lower

The Pound (GBP) has fallen further against the Australian Dollar (AUD) today, posting a -0.5% loss in the pairing.

This deterioration comes ahead of next Wednesday’s UK inflation rate data, which is forecast to show higher monthly and annual price growth.

Higher inflation rates risk the pace of price growth overtaking the pace of wage growth, which will return the UK to wage squeeze conditions.

Under such pressures, UK households can cut down on spending to make ends meet, which in turn can cause the retail sector to struggle.

GBP/AUD Exchange Rate Reverses Gains as BoE offers Gloomy Forecast for UK Economy

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has fallen by -0.4% today following a UK economic forecast from Bank of England (BoE) Deputy Governor Ben Broadbent.

Speaking on Tuesday, Mr Broadbent suggested that the UK economy was in the depths of a productivity crisis, without offering any clear explanation for poor output levels.

Suggesting that an immediate solution to the UK’s productivity puzzle isn’t in sight, Mr Broadbent said:

‘I don’t have high expectations of our knowing precisely what’s going on at the moment.’

Scepticism about United Brexit Stance Leaves GBP/AUD Exchange Rate Soft

Another factor causing Pound to Australian Dollar (GBP/AUD) exchange rate losses today has been uncertainty about the next developments in the Brexit process.

The UK government is due to release a white paper establishing its official stance on Brexit shortly, but it is still unclear what the line on post-Brexit trade will be.

Emphasising the need for this document to offer absolute clarity in a short space of time, BBC Political Editor Laura Kuenssberg has said:

‘Whether it’s aviation, medicines, the law, fishing, agriculture, the City, the list goes on and on – the Brexit department and other departments have got only a few weeks now to agree what to put into black and white.’

Australian Dollar to Pound (AUD/GBP) Exchange Rate Rises despite Static Wage Growth

Despite the handicap of unsupportive economic data, the Australian Dollar to Pound exchange rate (AUD/GBP) has still risen by 0.5% today.

The latest Australian data has seen a continuation of the status quo for workers, with a mere 0.5% wage growth being reported in Q1 2018.

This is unlikely to prompt immediate action at the Reserve Bank of Australia (RBA), which is still waiting for more supportive economic conditions before it acts on monetary policy.

Highlighting the disappointing nature of the latest wage figures, Tom Kennedy of JP Morgan has said:

‘The weakness in the wage data is particularly striking, given the strength of labour demand over the past year.’

Pound to Australian Dollar Exchange Rate Forecast: Will GBP/AUD Recover on BoE Speech?

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has a chance to rise on Thursday when Bank of England (BoE) Chief Economist Andy Haldane gives a speech.

Mr Haldane will be making remarks on Thursday afternoon which could touch on the subject of monetary policy, specifically whether a 2018 interest rate hike is likely.

Pound traders have been unsettled since the last BoE meeting, where despite a long-build up policymakers ultimately left interest rates on hold for another month.

If Mr Haldane hints at a 2018 interest rate hike taking place then the Pound could appreciate, as this could rekindle hopes for higher rates this year.

On the other side of the pairing, the Australian Dollar may be affected by jobs market data out on Thursday.

April’s unemployment rate isn’t expected to change, but a rising employment change, particularly for full-time employment, could increase demand for the Australian Dollar.

Falling unemployment is considered necessary for a Reserve Bank of Australia (RBA) interest rate hike, so signs that the jobless rate could drop might boost AUD exchange rates.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

Contact John Cameron