GBP/AUD Exchange Rate Muted Following Sharp Drop
The Pound Australian Dollar (GBP AUD) exchange rate is trading in a narrow range this morning after striking a one-week low in overnight trade.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7778. Virtually unchanged from this morning’s opening levels. But after having shed around half a cent in overnight trade.
Australian Dollar (AUD) Rallies on Hawkish RBA Comments
The Australian Dollar (AUD) remains well supported this morning, following a speech by new Reserve Bank of Australia (RBA) Governor Michele Bullock.
The hawkish tone of Bullock’s speech sent the ‘Aussie’ surging in overnight trade and led GBP/AUD to strike a new one-week low.
In her speech Bullock expressed concern that continuing global shocks risk inflation becoming entrenched over the longer term.
‘The problem is that we’ve just got shock, after shock, after shock. And the more that that keeps inflation elevated, even if it’s from supply shocks, the more people adjust their thinking. And the more people adjust their inflation expectations, the more entrenched inflation is likely to become.’
Bullock continued by suggesting that if inflation remains higher than expected the RBA is willing to respond by adjusting its monetary policy.
Pound (GBP) Steadies on Hotter-than-Expected Inflation
After Tuesday’s selloff, the Pound (GBP) has found its footing again this morning, with the publication of the UK’s consumer price index.
September’s CPI figures showed that headline inflation in the UK held at 6.7%, versus forecasts it would slow to 6.6%. While core inflation decelerated from 6.2% to 6.1%, but missed forecasts it would drop to 6%.
The hotter-than-expected inflation figures help to underpin Sterling this morning. Although this support appears limited in scope as analysts don’t believe this will be enough to encourage the Bank of England (BoE) to raise interest rates next month.
James Smith, developed markets economist at ING, suggests:
‘UK inflation has come in a little higher than expected, but given the surprise isn’t huge and some of it can be put down to volatile package holidays, we don’t think there’s enough here to tempt the Bank of England into resuming its rate hike cycle in early November.’
Pound Australian Dollar Forecast: Slump in Australian Employment Growth to Weaken the ‘Aussie?
Looking ahead, the Pound Australian Dollar exchange rate could extend its recovery with the publication of Australia’s latest employment figures.
Economists forecast employment growth will have slowed last month. With the number of jobs added by the Australian economy expected to fall from nearly 65,0000 to around 20,000.
A weaker jobs report is likely to dampen expectations for another RBA interest rate hike. Potentially leading the ‘Aussie’ to relinquish some of its recent gains.
Meanwhile, the focus for GBP investors in the second half of the week will be the UK’s latest retail sales figures.
This could lead any recovery in the Pound to be short lived as economists forecast sales growth will have slumped in September.