Pound Australian Dollar (GBP/AUD) Exchange Rate Rangebound as UK Food Inflation Rises
The Pound Australian Dollar (GBP/AUD) exchange rate is narrowing this morning, as UK food inflation continues to soar.
At the time of writing, GBP/USD was trading at around AU$1.7846, showing little movement from the morning’s opening rates.
Pound (GBP) Dented by Soaring Food Inflation
The Pound (GBP) is seeing poor trade this morning, as the cost-of-living crisis remains a focus for investors. With food inflation reaching another monthly high of 12.4%, investors are mindful of the impact inflation is having on households.
Rising food inflation is bringing a bleak outlook to the UK’s winter, by adding further restrictions to consumer spending.
Despite signalling further interest rate hikes from the Bank of England (BoE), caution remains over the impact on consumers.
Victoria Scholar, Head of Investment at Interactive Investor explored this sentiment. She stated:
‘Increasing essential food prices are adding to the cost-of-living crisis, unfairly impacting those at the lower at of the income spectrum more acutely. Families will be forced to make tough spending choices this festive season, with many opting for a slimmed down version of Christmas this year.’
Further weighing on Sterling was a dip in business confidence. UK businesses are growing more concerned about the impact the recession and inflation will have on the economy.
Australian Dollar (AUD) Buoyed by Falling Inflation
The Australian Dollar (AUD) is enjoying support this morning, as the CPI data for October printed below forecasts.
The news has served to reaffirm the Reserve Bank of Australia’s dovish stance on inflation. With consistent 25bps rate hikes expected, investors are upbeat as Australia becomes the latest country to see lowering inflation.
Robert Carnell, the Regional Head of Research, Asia-Pacific at ING explored this further. He stated:
‘At 6.9%, inflation is still way too high for comfort, but we believe that the RBA will see this as confirmation that it is on the right track, and that further declines could lead them to entertain thoughts of a pause in rates.’
Further boosting the ‘Aussie’ today is continued optimism around China’s Covid policy. Despite continued protests, the Chinese government has aimed to refine the policy, prompting hopes for an economic reopening.
However, Chinese PMI data may be adding headwinds to AUD due to its nature as a Chinese proxy-currency. With both manufacturing and non-manufacturing indexes demonstrating above-forecast contractions, the outlook for the Chinese economy looks bleak.
Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: Australian Manufacturing Uptick to Boost AUD?
Looking ahead for GBP/AUD, the core catalyst of movement may come overnight, with the latest Australian manufacturing index forecast to print at 50.
An uptick from last month’s reading of 49.6, the return to a flat rate may bring further support to AUD.
Economic data for the UK is lacking, which means the Pound may continue to trade on domestic news. Any further indication of the impact the recession is having on the UK may weaken Sterling.
Similarly, further developments in the wave of industrial action across the country may also dent GBP.