Pound Australian Dollar Exchange Rate Softens as Australian Inflation Impresses
The Pound Australian Dollar (GBP/AUD) exchange rate is trading just shy of a four-month low this morning, following the release of Australia’s consumer price index.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8324, virtually unchanged from today’s opening rate.
Australian Dollar (AUD) Firms on Core Inflation
The Australian Dollar (AUD) struck higher against the Pound (GBP) and the majority of its other peers overnight, as AUD investors reacted to the latest Australian CPI release.
According to data published by the Australian Bureau of Statistics (ABS), while headline inflation slowed from 3.8% to 3% in the third quarter, the trimmed mean print jumped from 1.6% to 2.1% over the same period. This is the first time the core inflation reading has climbed above 2% since 2015.
With the trimmed mean reading acting as the Reserve Bank of Australia’s (RBA) preferred indicator for inflation, today’s print has sparked some speculation that the RBA might be pressured into tightening its monetary policy earlier than previously expected.
Ben Udy, an economist at Capital Economics, comments:
‘The strong rise in underlying inflation will keep pressure on the RBA to keep reducing monetary stimulus in the months ahead.’
Alongside a broadly upbeat market mood, the prospect of an earlier-than-expected rate hike from the RBA is helping to underpin the Australian Dollar this morning.
Pound (GBP) Subdued ahead of Autumn Budget
Meanwhile, the Pound (GBP) is trading in a narrow range so far this morning as GBP investors await the publication of the Chancellor Rishi Sunak’s Autumn Budget later this afternoon.
Whilst Sunak has already offered plenty of insight into what the Budget will contain – with 19 press releases detailing various parts such as the rise in the national living wage – there is speculation that he might still be saving a few major announcements for the event itself.
For GBP investors the primary focus will be on the Chancellor’s tax plans, as well as any support the budget may contain for businesses recovering from the impact of the coronavirus pandemic.
Also of note to GBP investors will be the Office for Budget Responsibility’s (OBR) accompanying forecasts. Will a upwardly revised growth forecast for 2021 help to lift the Pound later this afternoon?
Pound Australian Dollar Forecast: UK Coronavirus Statistics in the Spotlight?
Looking ahead to the latter half of this week, in the absence of any major GBP data releases, movement in the Pound Australian Dollar (GBP/AUD) exchange rate could be driven by UK coronavirus headlines.
GBP investors are wary about the potential for the UK government to impose its Plan B measures if new cases remain elevated.
With the implementation of Plan B measures predicted to cost the UK economy as much as £18bn over the winter, a sustained drop in new infections could send the Pound higher.
Meanwhile, the focus for AUD investors in the latter half of the session looks to be the publication of Australia’s latest retail sales figures.
September’s preliminary figures are forecast to report another contraction of sales growth due to lockdown measures in place at the time in Sydney and Melbourne, a result which could send the Australian Dollar lower.