Pound Australian Dollar (GBP/AUD) Exchange Rate Falls as Aussie Inflation Hits 32 Year High
The Pound (GBP) is falling against the Australian Dollar (AUD) this morning after the Australian inflation rate came in above forecast.
At the time of writing, the GBP/AUD exchange rate is trading at roughly AU$1.7880, a dip of around 0.4% from the morning’s opening rate.
Australian Dollar (AUD) Rallies amid Soaring Inflation Rates
The Australian Dollar (AUD) is strengthening across the board this morning, as domestic inflation came in far beyond market forecasts.
The annual rate of inflation increased from 6.1% to 7.3% versus forecasts it would only rise to 7%, while the core inflation rate climbed to 1.8% in the third quarter.
With Western Australia in the grip of flooding, food prices accelerated alongside energy prices, prompting the increase in inflation.
The data bolstered the ‘Aussie’ as it prompted investors to rethink Reserve Bank of Australia (RBA) rate hike expectations. Investors suspect that the RBA will have to reconsider its dovish bias, and potentially adopt more aggressive hikes.
With Australian Treasurer Jim Chalmers added to this speculation, stating:
‘Whether it’s food, whether it’s electricity, whether it’s rent, inflation is public enemy number one. Inflation is the dragon we need to slay.’
Pound (GBP) Rallies amid Reports of Fiscal Statement Delay
Beyond losses against AUD, the Pound (GBP) is enjoying an across-the-board rally this morning as reports swirl of a delay to the 31 October fiscal statement.
With Rishi Sunak being seen as more economically savvy than his predecessor, the possible delay is welcomed by GBP investors.
The fiscal statement is necessary for providing clarity for Sunak’s government’s fiscal plans. However, a report has stated that Sunak wants to pore over the plans to ensure maximum clarity and feasibility.
Foreign Minister James Cleverly added to this, stating: ‘We know people want certainty. We know people want a clearer idea of the government’s plans. What we want to do is make sure that we get that right. If that means a short delay, in order to make sure that we get this right, I think that that is not necessarily a bad thing at all.’
Sunak’s appointment has already been a boon for Sterling, with GBP rising to pre mini-budget levels during this morning’s session.
Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: Sunak’s Fiscal Plans to Buoy Pound?
Looking ahead, the core catalyst of movement for the GBP/AUD exchange rate may be Sunak’s plans for the fiscal statement.
Should he opt to delay the document to work out the finer details, Sterling may be boosted as investors are reassured that his government will deliver a thought-through plan.
For Australia, Friday will bring the PPI readings for Q3. Should they increase as forecast, AUD may see a boost as the Australian economy shows signs of recovery.