Pound Australian dollar (GBP/AUD) exchange rate stable as UK inflation cools less-than-expected
The pound Australian dollar (GBP/AUD) exchange rate is holding its ground this morning in the wake of a stronger-than-expected UK inflation print.
At the time of writing the GBP/AUD exchange rate is trading at $1.9409, virtually unchanged from this morning’s opening rate.
Pound (GBP) ticks up following stronger-than-expected UK inflation
The pound (GBP) is enjoying modest support this morning and is managing to firm against the majority of its peers following the publication of latest UK consumer price index..
Both headline and core inflation cooled less-than-expected in March, with headline inflation falling from 3.4% to 3.2% rather than an expected 3.1%, whilst core inflation slid from 4.5% to 4.2% rather than 4.1% as forecast.
This served to lift GBP exchange rates this morning on the back of fading Bank of England (BoE) interest rate cut bets.
As inflation is seemingly sticker than previously anticipated, analysists have reduced their rate cut bets from June to August.
Tomasz Wieladek, Chief European Economist at Asset Manager T. Rowe Price, predicts:
‘The sticky services inflation numbers raise the risk the UK inflation battle is far from over and perhaps not yet won. The MPC will be worried about this scenario, and I believe this strong reading will make the MPC cautious about cutting early in the summer. Indeed, given these strong domestic inflationary pressures in both wages and services, the MPC will now likely wait until late summer to get the required confidence to cut rates.’
Australian Dollar (AUD) rebounds amid improved market mood
The Australian dollar (AUD) is managing to hold steady against the majority of its counterparts this morning as the currency is being underpinned by an improvement in risk appetite.
As a risk-sensitive currency, positive trading conditions generally support the Australian dollar.
As tensions continue to escalate in the Middle East following reports of a drone strike from Iran onto Israel over the weekend, Wednesday has marked the first turn to upbeat trading conditions since the start of the week.
GBP/AUD Exchange Rate Forecast: RBA Bulletin to drive AUD movement?
Looking ahead, the primary catalyst of movement for the pound Australian dollar exchange rate for the remainder of the week is likely to be the release of the Reserve Bank of Australia’s (RBA) latest bulletin.
Expected to touch on consumer inflation expectations and the future of monetary policy, any signs that consumer’s expect inflation to further cool could undermine AUD exchange rates. Equally, any dovish remarks from policymakers surrounding potential interest rate cuts could also rock the ‘Aussie.’
Turning to the pound, Friday will see the release of the UK’s retail sales data for March.
The latest monthly figure is expected to show a small 0.3% increase in retail sales, coming up from a previous reading of 0%.
Should the data print as expected and confirm a slight uptick in retail sales in March, Sterling sentiment could be buoyed.