Pound Australian Dollar (GBP/AUD) Exchange Rate Rallies as Australian CPI Cools
The Pound Australian Dollar (GBP/AUD) exchange rate is rallying this morning, as Australian inflation cooled further-than-expected in February.
At the time of writing, GBP/AUD is trading at around AU$1.8493, a rise of almost 0.6% from today’s morning rates.
Australian Dollar (AUD) Slides as Inflation Cools Further Than Expected
The Australian Dollar (AUD) is weakening this morning, following the overnight print of the country’s latest CPI data.
The monthly reading for February printed below forecasts at 6.8%, cooling from 7.4%. Forecasts pegged inflation to cool to 7.1%, so the downside surprise is weighing heavily on AUD.
A sharp retreat in holiday travel prices and accommodation were shown to be the primary causes. While one last hike from the Reserve Bank of Australia (RBA) is expected, and largely priced in, a pause seems likelier.
Marcel Thieliant, Senior Economist at Capital Economics, explains:
‘The further sharp fall in inflation coupled with the softness of consumption will probably prompt the Reserve Bank of Australia to pause its tightening cycle next week.’
Elsewhere, upbeat trading conditions may be keeping the ‘Aussie’ from drastic losses. Risk appetite remains high across the markets as jitters recede over the global banking sector.
Pound (GBP) Uninspired amid Lack of Data Releases
The Pound (GBP) is seeing calm trade this morning, with little in the way of economic data releases to act as a driver.
However, reassurances from the Bank of England (BoE) could be serving to underpin Sterling. BoE Governor Andrew Bailey testified before the Treasury Committee yesterday.
Bailey outlined how the BoE were substantially more vigilant around the current banking crises than previous ones. Because of this, confidence has begun to return to the UK’s banking sector.
Furthermore, persistent rate hike bets could be lending some cushioning for GBP. Inflation remains in double digits, which is leading economists to believe that the BoE will have to continue tightening.
Adding to this expectation was news yesterday from the British Retail Consortium (BRC). They found that food inflation had skyrocketed, and that shop price inflation had yet to peak. As such, GBP is likely carrying through momentum from these comments during today’s session.
GBP/AUD Exchange Rate Forecast: Thin Data Calendar to Blight GBP?
Looking ahead for the Pound, a lack of significant data could leave GBP vulnerable to external factors. With the Pound holding an increasingly risk-sensitive side, a souring market mood could weigh it down.
Elsewhere, Friday’s final GDP prints could provide some direction. If they print above forecasts, Sterling could rally. However, no major deviation is likely and as such they may have little impact on GBP.
For the Australian Dollar, Friday morning sees the release of Chinese private sector PMIs. March’s activity in both manufacturing and non-manufacturing sectors is forecast to have slowed.
If this prints accurately, it could weigh on the ‘Aussie’ due to its nature as a Chinese proxy-currency. However, with the sectors remaining in growth territory, the release could bring a boon to AUD.