Pound Sterling Australian Dollar Exchange Rate News: GBP/AUD Unfazed by Rise in UK Inflation

GBP/AUD Exchange Rate Steady as UK Inflation Fails to Deliver Gains

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning as markets appear largely unfazed by the release of the UK’s latest inflation figures.

At the time of writing the GBP/AUD exchange rate is virtually unchanged from today’s opening levels, leaving the pairing to continue to trade close to a two-week high.

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Flat Despite Rise in UK Inflation

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate remains muted this morning despite an uptick in the UK’s latest Consumer Price Index (CPI).

According to data published by the Office for National Statistics (ONS), the UK’s inflation rate ticked up from 2.4% to 2.5% in July, the first increase since November.

The release revealed that the rise in inflation was mostly driven by increases in computer games and transportation costs, while a 0.4% fall in clothing and footwear prices over the last twelve months contributed some downward pressure.

While rising inflation would normally contribute to an upswing in the Pound, GBP investors appeared largely unfazed by today’s release, suggesting that the Bank of England’s (BoE) cautious outlook for interest rates has left markets dismissive of a slight uptick in inflationary pressure.

Australian Dollar (AUD) Exchange Rates Pressured by Subdued Wage Price Index

At the same time the Australian Dollar (AUD) faces headwinds this morning as markets reacted to Australia’s latest wage growth figures.

The latest report from the Australian Bureau of Statistics (ABS) revealed that annual wage growth held at 2.1% in the second quarter.

Wage growth has now stabilised between 2 and 2.1% over the last four quarters, far below the long term average and most worryingly for AUD investors shows no signs of rising any time soon.

Analysts predict that this trend could see the Reserve Bank of Australia (RBA) delay its next rate hike until 2020, an outlook which reflects poorly on the Australian Dollar.

UBS’ economics team suggests:

‘Q3 wages will likely remain low and still far below the 3.5% that RBA Governor Lowe indicated is consistent with sustaining their 2-3% CPI target.

‘We remain more dovish than consensus on inflation and wages, and continue to see the RBA on hold until 2020.’

GBP/AUD Exchange Rate Forecast: Slowing Employment Growth to Weaken the ‘Aussie’?

Looking forward the Pound Australian Dollar (GBP/AUD) exchange rate could move higher overnight on Wednesday as Australia publishes its latest labour report.

While unemployment is forecast to have held at 5.4% in July, an expected slowdown in employment growth could see the ‘Aussie’ tumble during the Asian session.

Meanwhile Sterling may find support on Thursday with the release of the UK’s latest retail sales figures, with economists predicting that domestic sales growth will have rebounded from -0.5% to 0.2% in July.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon