Pound Australian Dollar (GBP/AUD) Exchange Rate Soars as Australian Inflation Cools
The Pound Australian Dollar (GBP/AUD) exchange rate is climbing this morning, as Australian inflation printed below expectations.
At the time of writing, GBP/AUD is trading at around AU$1.9105, rising by just under 0.6% from the morning’s opening rates.
Australian Dollar (AUD) Collapses amid Cooling Inflation
The Australian Dollar (AUD) is collapsing this morning, following the earlier release of the latest consumer price index.
Inflation was found to have cooled far below forecasts over the second quarter, printing at 6%, 0.2% below forecasts. Analysts exploring the release are suggesting that it points to overtightening from the Reserve Bank of Australia (RBA), further denting the ‘Aussie’.
Stephen Smith, Economics Partner at Deloitte Access, commented:
‘The Australian economy is softening dramatically, the pace of inflation has peaked and is moderating quickly, wage growth is not excessive and medium-term inflation expectations are not rising. In that context, there should be no further interest rate increases in Australia.’
Australian Treasurer Jim Chalmers further offered that there was still more to come to combat inflation. However, market reaction to this was less-than-stellar, as it did little to stem the ‘Aussie’s losses.
Furthermore, a decline in risk appetite is likely contributing additional headwinds for the risk-sensitive Australian Dollar.
Pound (GBP) Defensive amid Souring Market Mood
The Pound (GBP) is on the defensive this morning, with the market mood clouding ahead of tonight’s Federal Reserve interest rate decision.
With a hawkish attitude from the Fed a distinct possibility, markets are concerned over the impact further tightening could have on global economic growth. Because of the Pound’s increasingly risk-sensitive nature, it appears unable to garner much support.
Similarly, a light data calendar is leaving Sterling more vulnerable to the souring market mood, with little to buoy GBP.
Furthermore, the recent declines in the UK private sector may be leaving Sterling further vulnerable to pulled back rate hike bets. Little room appears to be left for the Bank of England (BoE) to tighten further, with inflation appearing to have turned a corner.
GBP/AUD Exchange Rate Forecast: CBI Data to Weigh on GBP?
Looking ahead for the Pound, tomorrow brings the publication of the latest distributive trades data from the Confederation of British Industry (CBI).
An improvement is forecast, with retail sales rising from -9 to -2, but the picture may remain bleak. With this in mind, the Pound could struggle for support if the UK retail sector remains downbeat.
For the Australian Dollar, the core catalyst of movement may come from tomorrow’s Chinese industrial profits data. For the year-to-date through June, profits are forecast to have fallen 15%, which could weaken the Chinese proxy-currency.
On Friday, the latest quarterly PPI data is due to print. Economists currently forecast a 0.7% decline, which could weigh on the ‘Aussie’ by showing a continued cooldown in inflation.