Pound Australian Dollar (GBP/AUD) Exchange Rate Slips as UK Inflation Cools
The Pound Australian Dollar (GBP/AUD) exchange rate is slipping this morning following cooler-than-expected UK inflation.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9156, down approximately 0.3% from this morning’s opening rate.
Pound (GBP) Slumps amid Cooling Inflation
The Pound (GBP) faces heavy selling pressure this morning following the UK’s latest inflation report.
Headline inflation cooled significantly more than expected in October, falling to 4.6% from September’s reading of 6.7%.
Steep inflationary declines have served to disparage already waning Bank of England (BoE) interest rate hike bets this morning. The BoE’s verbal stance on monetary policy has been increasingly dovish in recent days, and investors see today’s inflation data as evidence the BoE’s rate hike cycle is over.
Hugh Gimber, Global Market Strategist at J.P. Morgan Asset Management, observed the same in his comments earlier today:
‘The case against any further rate hikes is increasingly clear, but significantly more evidence will be required before rate cuts can start to be considered. The tightness of the labour market remains the key concern.’
With investors and analysts alike anticipating the end of the BoE’s tightening cycle, the Pound may decline for the remainder of today’s session.
Australia (AUD) Edges Higher following Upbeat Data
The Australian Dollar (AUD) firmed overnight following the latest Chinese data releases.
AUD’s status as a proxy currency for the Chinese economy left the ‘Aussie’ catching bids in the wake of rising Chinese retail sales and strong industrial production. Retail sales ticked up to 7.6%, while industrial output came in higher than expected at 4.6%.
The risk-sensitive ‘Aussie’ also benefits from a cheery market mood this morning, sparked by China’s economic strength and the implementation of an increased lending scheme from the People’s Bank of China (PBoC).
While the PBoC kept interest rates unchanged, an increasing appetite for risk permeated global markets, leading investors to opt for AUD in place of its safer peers. Any shifts in risk appetite may impact the ‘Aussie’ as the European session progresses, amid a lack of fresh Australian data.
Pound Australian Dollar Exchange Rate Forecast: Jobs Data to Dent AUD?
Looking ahead, Australia’s latest jobs data is due tomorrow. Should unemployment rise to 3.7% as forecast, the ‘Aussie’ may stumble amid a loosening labour market.
On Friday, an uptick in UK retail sales could lend Sterling some support. A forecast rise of 0.3% in October would indicate increased consumer activity, with signs of increased spending helping to soothe recent UK recession anxieties.
Investors may also look to various Bank of England speeches, which are due throughout the remainder of the week. Should BoE policymakers strike a hawkish tone, the Pound may garner investor interest.
However, GBP may stumble should BoE policymakers indicate that further interest rate hikes remain unlikely. Amid rapidly falling inflation and an increasingly dovish rhetoric adopted towards monetary policy, investors may expect tepid commentary at most.
The risky ‘Aussie’ may remain vulnerable to risk appetite in the coming days, ahead of key Australian data releases. Should the Chinese house price index disappoint later in the week, worries about China’s ailing property sector may spook investors, potentially sparking a safe-haven dash.