Pound Australian Dollar (GBP/AUD) Exchange Rate Soars as UK Inflation Jumps above 10%

Pound Australian Dollar Exchange Rate Rallies on Hotter-than-Expected UK Inflation

The Pound Australian Dollar (GBP/AUD) exchange rate is rallying this morning, in response to the UK’s latest inflation figures.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7370. Up roughly 0.8% from today’s opening rate.

Pound (GBP) Strengthens as Surging Inflation Bolsters BoE Rate Hike Bets

The Pound (GBP) is enjoying strong gains against the Australian Dollar (AUD) this morning. A stronger-than-expected UK CPI print underpinning demand for Sterling.

According to data published by the Office for National Statistics (ONS), domestic inflation surged from 9.4% to 10.1% in July. This was well above forecasts it would rise to 9.8% and propels inflation to a new 40-year high.

The latest jump in inflation is underpinning the GBP/AUD exchange rates this morning. Reinforcing bets for another 50bps rate hike from the Bank of England (BoE) next month.

Jake Finney, an economist at PwC, suggests:

‘UK consumer price inflation increased to 10.1% in July, reaching double digits for the first time since 1982. As this is slightly higher than the Bank of England’s expectation of 9.9%, we expect today’s CPI data to add to existing pressure for the Bank to act more decisively, perhaps by increasing its headline policy rate by 50 basis points in its next meeting in September.’

However, the spike in inflation is also raising fears over the UK’s growth outlook. Concerns over which may be limiting the Pound’s upside potential today.

A sharp increase in interest rates – coupled with soaring prices – is likely to choke consumer spending in the coming months.

GBP investors fear a collapse in consumer spending will make a UK recession inevitable.

Australian Dollar (AUD) Slides on Weaker-than-Expected Wage Growth

The Australian Dollar (AUD) stumbled overnight with the publication of Australia’s wage price index.

The Australian Bureau of Statistics (ABS) reported the wage price index rose 2.6% in the second quarter. Missing forecasts it would climb to 2.7%.

The weaker-than-expected result appears to have further dampened bets for another 50bps hike from the Reserve Bank of Australia (RBA).

The Australian Dollar has also been knocked by another slump in commodity prices. Iron ore and other key Australian exports are currently at multi-week lows amid fears of a looming global recession.

Pound Australian Dollar Forecast: Upbeat Employment Figures to Boost the ‘Aussie’?

The Pound Australian Dollar (GBP/AUD) exchange rate may falter tomorrow with the publication of Australia’s latest jobs report.

Domestic unemployment is expected to have held at 3.5% in July. Record low unemployment could help to revive hopes for a 50bps rate hike from the RBA.

The release of the UK’s latest retail sales figures will likely act as the primary catalyst of movement in the Pound through the second half of the week.

Economists forecast sales growth will have contracted for a third consecutive month in July. Stoking recession fears and likely sapping Sterling sentiment.

Matthew Andrews

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