Pound Australian Dollar (GBP/AUD) Exchange Rate Slips on UK CPI
The Pound Australian Dollar (GBP/AUD) exchange rate slumped earlier today after another jump in UK inflation intensified fears about the UK’s cost-of-living crisis.
This drop in the Pound (GBP) allowed the ‘Aussie’ to regain ground lost overnight.
Pound (GBP) Stumbles as Inflation Soars
The Pound tumbled this morning after the UK’s latest inflation rate reading showed a two-percentage-point jump.
In April, UK inflation surged from 7% to 9%, pushed up by the 54% increase in the energy price cap. While the reading was a smidge below the expected 9.1%, it still represents the highest rate of inflation in over 40 years and is well above the Bank of England’s (BoE) 2% target.
Although higher inflation could prompt the BoE to continue hiking rates, which would normally support the Pound, today’s results have had the opposite effect. Following the CPI, Sterling slumped.
The downside comes as economists warn that the UK is heading for a recession. Soaring inflation comes alongside higher taxes, while regular pay continues to lag behind. Households are therefore tightening their belts, leading to declining consumer spending.
In addition, businesses are reining in investment plans as they face an increasingly bleak economic outlook.
This troubling situation is weighing heavily on Sterling today.
Australian Dollar (AUD) Limited amid Lukewarm Market Mood
Meanwhile, the Australian Dollar (AUD) is gaining ground today after slipping in overnight trade.
Australia’s latest wage data printed below expectations last night, causing AUD exchange rates to fall.
Yet the ‘Aussie’ has been able to regain these losses since the European session began.
A tepid market mood may be limiting the risk-sensitive ‘Aussie’ Dollar’s upside. European stocks are wavering while commodities are mixed as investors react to a turbulent global economy.
GBP/AUD Exchange Rate Forecast: ‘Aussie’ to Rise on Jobs Data?
During today’s session, GBP/AUD could move around a little more as markets fully digest the UK’s inflation rate reading.
In addition, risk appetite may exert an influence over the pair.
Overnight, Australia’s latest unemployment rate is in focus. Economists expect the rate to fall from 4% to 3.9%. Such a result will likely lift the ‘Aussie’ by indicating that the labour market continues to strengthen, which in turn could boost Reserve Bank of Australia (RBA) rate hike bets.