GBP/AUD Exchange Rate Flat as UK Inflation Slides to One-Year Low
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was forced to relinquish its early gains this morning as markets reacted to an unexpectedly weak inflation report from the UK.
At the time of writing the GBP/AUD exchange rate was flat, having relinquished the 0.2% gains made at the start of the day’s session.
Pound Australian Dollar (GBP/AUD) Exchange Rate could be exposed to Oil Price Rises
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate is currently trading in a narrow range this morning, following the release of the UK’s latest CPI figures.
According to data published by the Office for National Statistics (ONS) the UK’s inflation rate dipped from 2.5% to 2.4% in April, striking its lowest levels in over a year and dragging on the Pound (GBP) exchange rate.
The ONS attributed the fall to a slowdown in clothing price growth as well as a downward contribution from food and non-alcoholic beverages sales.
The result was a blow to GBP investors as it appears to have dampened the chances the Bank of England (BoE) could still raise interest rates in 2018.
However some analysts suggest the drop in inflationary pressures could prove to be short lived with Kevin Doran, chief investment officer at AJ Bell suggesting:
‘The recent weakness in the pound and the rising oil price are a concern and could quickly reverse the drop in inflation.’
This may leave some hopes that a rate hike from the BoE could still be possible this year if other areas of the UK economy show some growth.
Australian Dollar (AUD) Exchange Rate Stumbles as Geopolitical Tensions Rise
Meanwhile renewed geopolitical tensions and a corresponding drop in market risk appetite is dragging down the Australian Dollar (AUD) against its other peers this morning.
This comes in the wake of comments from US President Donald Trump as he cast doubts on whether a historic summit with North Korean Leader, Kim Jong-un would actually take place.
Trump, meeting with South Korean President Moon Jae-in said ‘there’s a chance, a very substantial chance it won’t work out’, with his comments spooking markets and denting the ‘Aussie’.
Also weighing on the AUD exchange rate this morning was Australia’s first quarter construction activity, which came up short of forecasts.
Data published by the Australian Bureau of Statistics (ABS) revealed the value of construction work only rose by 0.2% at the start of the year.
While this was up from an 18.3% contraction the previous quarter it was still way behind forecasts of a 1.1% increase.
GBP/AUD Exchange Rate Forecast: Rebound in Retail Sales to Bolster Sterling?
Looking ahead the GBP/AUD exchange rate may strengthen on Thursday, following the publication of the UK’s latest retail sales figures.
Economists forecast tomorrow’s data will reveal sales growth rebounded from -1.2% to 0.7% in April, likely lending support to the Pound (GBP) exchange rate.
However Sterling could fall back again on Friday as the latest GDP estimate is expected to confirm UK economic growth slowed to just 0.1% in the first quarter.
Meanwhile a continued lull in economic data may cause the Australian Dollar (AUD) to struggle in the latter half of the week, especially in the face of plummeting iron ore prices and the ongoing rally in the US Dollar (USD).