Pound Australian dollar (GBP/AUD) exchange rate ticks upward as Australian CPI holds
The pound Australian dollar (GBP/AUD) exchange rate is firming this morning, amid cooler-than-expected Australian inflation data.
At the time of writing, GBP/AUD is trading at around AU$1.9349, an increase of roughly 0.2% from today’s morning levels.
Australian dollar (AUD) pressured by below-forecast inflation
The Australian dollar (AUD) is softening this morning, as the latest monthly consumer price index indicator missed forecasts.
In February, inflation remained at 3.4% for the third consecutive month, beneath expectations of an uptick to 3.5%. This may be indicative of sticky inflation, but underlying factors suggest that it could continue cooling soon.
Robert Carnell, Regional Head of Research, Asia-Pacific at ING, commented:
‘While it may appear that inflation has bottomed out, base effects over the coming months should make it easier for inflation to resume its descent, bringing the Reserve Bank of Australia closer to its 2-3% target range, and raising the possibility for some monetary easing later this year.’
However, the ‘Aussie’ is likely seeing its losses stemmed by a risk-on market mood this morning. As a more risk-sensitive asset, AUD is able to catch bids as investors eye more volatile options.
The mood is likely caused by news that China’s industrial profits returned to growth, showing a 10.2% increase year-on-year.
Pound (GBP) quiet amid lack of data
The pound (GBP) is trading in a muted capacity this morning, amid a continued lack of macroeconomic data.
This is leaving Sterling to trade in line with the market dynamics, with a somewhat upbeat market mood underpinning it against safer assets.
Furthermore, investors may be continuing to deliberate over the timing of Bank of England (BoE) interest rate cuts.
As hawkish comments from BoE policymaker Catherine Mann were largely ignored yesterday, this suggests that the idea of a June rate cut is becoming a consensus.
Between the recent dovish tinge to BoE communication, and acknowledgement of softening services inflation, GBP is being pressured by increased rate cut bets.
Pound Australian dollar exchange rate forecast: AU retail sales in focus
Looking ahead for the Australian dollar, the core catalyst of movement is likely to be February’s retail sales data.
Due to print tomorrow, economists expect sales to have increased by 0.4% on a monthly basis. If this prints as expected, the ‘Aussie’ could gain ground as it may demonstrate continued consumer resilience.
For the pound, meanwhile, a lack of other releases may push the final GDP data for 2023’s fourth quarter into focus.
As the preliminary release indicated that the UK had entered a technical recession, confirmation of this could weaken Sterling. However, if it surprises to the upside, GBP exchange rates could rally.
Elsewhere, risk appetite is likely to be a key factor in shaping GBP/AUD’s direction. As the ‘Aussie’ is more risk-sensitive, bearish trading conditions could weaken it against the slightly safer pound.