Pound Australian dollar (GBP/AUD) tumbles amid increase in risk appetite
(Updated 16:30, 18/06/24) The pound Australian dollar (GBP/AUD) exchange rate has collapsed this afternoon as upbeat trading conditions have swept markets.
As such, the acutely risk-sensitive Australian dollar (AUD) has managed to gain ground against the majority of its peers, including the pound (GBP).
At the time of writing, GBP/AUD is trading at around AU$1.9084, a decrease of roughly 0.6% from today’s opening levels.
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Pound Australian dollar (GBP/AUD) exchange rate dips following hawkish RBA
The pound Australian dollar (GBP/AUD) exchange rate is on the back foot this morning following the Reserve Bank of Australia’s (RBA) latest interest rate decision.
At the time of writing the GBP/AUD exchange rate is trading at $1.9165, down roughly 0.2% from this morning’s opening rate.
Australian Dollar (AUD) bolstered by hawkish RBA
The Australian dollar (AUD) is firming against the majority of its peers this morning following the publication of the Reserve Bank of Australia’s latest interest rate decision.
The central bank held the Official Cash Rate (OCR) at 4.35% for a fifth consecutive time following its June meeting, however, the accompanying forward guidance struck a hawkish tone.
Michelle Bullock, the RBA’s Governor, indicated that the bank is open to an interest rate hike, whilst also confirming that a rate cut was completely off the table for this month’s meeting.
The RBA’s hawkish tone was linked to it outlook on inflation, with policymakers concerned that it is not decelerating at the desired pace.
The RBA’s statement read:
‘Inflation has fallen substantially since its peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. But the pace of decline has slowed in the most recent data, with inflation still some way above the midpoint of the 2–3 per cent target range.’
Pound (GBP) undermined by falling grocery inflation
The pound (GBP) is on the defensive against the majority of its peers following the release of the UK’s latest grocery inflation data.
Market research group Kantar reported that domestic grocery inflation cooled from 2.4% to 2.1% this month.
Grocery inflation has now cooled for 16th consecutive months, with the latest fall being linked to the wet weather.
Kantar’s Fraser McKevitt explains:
‘We’re not yet reaching for those typical summertime products and are making some purchases you wouldn’t expect in June. Consumers bought nearly 25% fewer suncare items this month compared with last year, while prepared salads dipped by 11%. On the other hand, warming fresh soup sales jumped by almost 24%.’
This set of inflation figures sets the stage for tomorrow’s consumer price index.
GBP/AUD exchange rate forecast: UK inflation in the spotlight
Looking ahead, the primary driver of movement for the pound Australian dollar exchange rate tomorrow will be the UK’s upcoming CPI data.
With headline inflation expected to return to the BoE’s 2% target, this will likely ramp up BoE rate interest rate cut bets, and in turn undermine GBP.
Turning to the Australian dollar, data releases will remain scarce for the middle of the week, and as such could see the ‘Aussie’ trade in line with risk appetite.
Expected to see the ‘Aussie’ relinquish some of its recent gains if a cautious mood prevails.