Pound Australian Dollar Exchange Rate Slides on Loosening AU Restrictions
(Updated 16:10, 15/12/2021) The Pound Australian Dollar (GBP/AUD) exchange rate is falling this afternoon as Australian authorities allow skilled migrants, foreign students and holiday visa holders to cross the country’s border once more.
While other countries are tightening restrictive measures to prevent the spread of the contagious Omicron Covid variant, Australia strikes a different path: Prime Minister Scott Morrison defended his decision last week, announcing plans to ‘keep moving forward, not go back.’
Morrison played down the severity of the illness caused by Omicron, saying that was ‘potentially quite a game changer with the pandemic around the world about how the virus may well step down, but we’ll see’.
Meanwhile, Sterling has attracted downside as investors conclude that this morning’s higher-than-expected inflation is unlikely to inspire a last-minute interest rate hike from the Bank of England (BoE) tomorrow: uncertainty over the Omicron variant and its rapid spread through the UK continues to incite dovish messaging.
Nevertheless, if the UK central bank implies a possible rate hike early next year, some GBP upside may be restored.
Original article continues below:
GBP/AUD Exchange Rate Fluctuates on Hot UK Inflation
The Pound Australian Dollar (GBP/AUD) exchange rate is trading level this morning following the release of the UK’s Consumer Price Index (CPI). The data exceeded expectations, revealing a jump to 5.1% from 4.2% the previous month.
At the time of writing, GBP/AUD is trading at A$1.8609, virtually unchanged from today’s opening levels.
Pound (GBP) Strengthens Overall on Higher-Than-Expected CPI
The Pound (GBP) is rising against the majority of its peers this morning, finding support on today’s inflation data.
November’s jump to 5.1% well exceeded consensus estimates of 4.7%; core inflation also rose to 4% from 3.4% previously. According to the Office for National Statistics (ONS), prices have jumped at the fastest annual rate since September 2011.
Despite the surge to more than double the UK’s 2% inflation target, the data has done little to revive hopes of an imminent interest rate hike from the Bank of England (BoE).
The imposition of Plan B Covid-19 restrictions last week inspired bearish trading and a dovish tone amongst central bank policymakers, including the known hawk, Michael Saunders.
Rising costs of transport, food, energy and household services mean that inflation is now rising faster than pay, leaving many facing a renewed cost of living squeeze.
According to the Resolution Foundation, pay has been falling in real terms since June: the independent think-tank remarked yesterday that ‘the gloomy outlook for living standards looks set to continue well into next year.’
Australian Dollar (AUD) Firms on Upbeat Chinese Data, Mixed Market Mood
The Australian Dollar (AUD) is climbing today as a tentatively optimistic market mood supports the currency. Markets are braced for the Federal Reserve Bank to announce an acceleration of its bond purchase tapering this afternoon.
Also underpinning the ‘Aussie’ is an upbeat release from China: industrial production was revealed to have risen on a yearly basis this morning, by 3.8% rather than the 3.6% expected.
Subsequently, analysts at JP Morgan have raised their forecast for China’s fourth quarter and 2022 GDP, now expecting Q4 growth to come in at 4.9% father than the 4% previously predicted.
2022 GDP is forecast to reach 4.9% likewise, from a previously expected 4.7%.
The analysts explain their decision as a result of ‘combining the November activity data with the solid October figures.’
Strength in the Chinese economy benefits the Australian Dollar, due to the strong trading relationship between the two countries.
Pound Australian Dollar Exchange Rate Forecast: Upbeat AU PMIs to Lend AUD Upside?
Looking ahead, this evening’s flash PMIs for the Australian manufacturing and services sectors may influence trading – both are expected to reveal an increase in December’s activity.
A speech from the Reserve Bank of Australia’s Governor Philip Lowe may also affect the Pound Australian Dollar exchange rate.
Meanwhile, GBP is likely to trade today on the continued fallout from this morning’s inflation data; any further cautions over the Covid Omicron variant may exert downside.