Pound Australian Dollar (GBP/AUD) Exchange Rate Trades Sideways as UK Inflation Stalls at Three-Year Low

GBP/AUD Exchange Rate Muted Following UK CPI Figures

The Pound to Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning as markets respond to the UK’s latest consumer price index.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9145, virtually unchanged from this morning’s opening rate.

Pound (GBP) Uninspired as Inflation Stagnates

The Pound (GBP) is struggling to find momentum this morning, in the wake of the UK’s latest CPI figures.

According to data published by the Office for National Statistics (ONS), headline inflation held at 1.5% in November, beating forecasts it would slip to 1.4% but still languishing at a three-year low.

The ONS reported that inflation remained steady as a rise in prices for chocolate, concert tickets and package holidays was offset by falling hotel and tobacco prices.

The lacklustre response to the CPI figures is likely in part to the renewed jitters over Brexit, with GBP investors fearing the risks of a no-deal Brexit are rising again as Boris Johnson seeks to rule out any further extension to Brexit.

Australian Dollar (AUD) Side-Lined by Risk-Off Mood

The Australian Dollar (AUD) is trading sideways this morning, as the risk-sensitive currency is undermined by a prevailing sense of caution in markets.

This comes as markets clamour for details over the phase one trade deal recently agreed between the US and China, with investors growing increasingly sceptical as both sides remain silent.

Analysts at ING explain:

‘What the market needs now, though, is clarity around exactly what the deal entails. The longer we have to wait for this detail, the more likely market participants will start to question how good a deal it actually is.’

The Australian Dollar also continues to be undermined by the latest minutes from the Reserve Bank of Australia (RBA) which have stoked expectations the bank will cut rates again in February.

GBP/AUD Forecast: Dovish BoE Forward Guidance to Drag on Sterling?

Looking ahead to the second half of the week, we may see the Pound to Australian Dollar (GBP/AUD) exchange rate come under pressure as the Bank of England (BoE) concludes its final policy meeting of 2019.

While no policy changes are expected from the BoE this month, GBP investors will be keen to hear more about the bank’s plans for 2020.

This could see Sterling take a knock if the BoE signals it could cut rates in early 2020 once Boris Johnson passes his Brexit deal.

In the meantime, the publication of Australia’s latest jobs report will be closely watched by AUD investors later tonight.

Economists forecast November’s figures will show that employment growth rebounded following a surprise slump in October.

However, any upside in the Australian Dollar may prove limited as unemployment is expected to remain stubbornly high at 5.3%.

Matthew Andrews

Contact Matthew Andrews