GBP/AUD exchange rate firms as pound gains appeal
The pound Australian dollar (GBP/AUD) exchange rate is trending upward today, as softer-than-expected US inflation triggered tailwinds for the US Dollar’s (USD) major rivals. Meanwhile, the Australian Dollar (AUD) climbs in several exchange rates as China’s trade surplus exceeded expectations overnight.
At the time of writing, GBP/AUD is trading at A$1.9134, having firmed by almost 0.5% in the past 24 hours.
Pound (GBP) buoyed by weak US inflation
The pound (GBP) is rising against its peers at the end of the week, boosted by USD headwinds. Following yesterday’s disappointing US inflation release, bets on an imminent interest rate cut from the Federal Reserve have proliferated.
By comparison, the Bank of England (BoE) seems determined to hold a hawkish position. Policymakers are concerned that wage growth remains roughly double the amount necessary to achieve price stability and have given statements accordingly.
Earlier in the week, rate-setter Catherine Mann responded to a question about how falling inflation will affect her policy standpoint:
‘Until I see some you know, deceleration, sustained deceleration in services, I really I’m not in a position [to vote for an interest rate cut].’
Also boosting the pound today is yesterday’s upbeat GDP release, which revealed that the UK economy grew by more than expected in May. GDP printed at 0.4% rather than the forecast 0.2%, as services, manufacturing and construction activity surged.
Amid lingering political tailwinds, positive economic data has helped GBP/AUD to reach a 24-day high. Robust fiscal policies are anticipated from the new Labour government, as Chancellor Rachel Reeves has pledged to stimulate growth and investment with a focus on the supply side.
Australian dollar (AUD) supported by Chinese data
The Australian dollar is trading in a mixed range today, though finds support against several peers. Buoying the currency is upbeat data from China, low morale amongst USD investors and expectations of a hawkish Reserve Bank of Australia (RBA).
During the early Asian session, China’s trade surplus printed at $99.05bn rather than the $85mn forecast: the largest reading since July 2022 as exports grew at their fastest pace in 15 months. According to analysts at ING bank, trade in autos and semiconductors helped boost exports.
Given the close trading relationship between China and Australia, upbeat news from the former invariably supports the ‘Aussie’. As AUD is a risk-on currency, it also benefits from weakness in the safe-haven US Dollar.
The latest US consumer price data has weighed heavily upon the ‘Greenback’, with officials such as San Francisco’s Fed Bank President Mary Daly remarking that one or two rate cuts will be appropriate this year.
Similarly to the Bank of England, the Reserve Bank of Australia takes a more hawkish view. Inflationary pressures in Australia remain persistent, prompting speculation that the RBA may delay its rate-cutting cycle or even raise interest rates again.
Josh Williamson, economist at Sydney’s Citigroup Inc, remarks:
‘[Australian households] will need to grapple with another interest rate hike… This could take the wind out of the consumer in the second half.’
GBP/AUD forecast: exchange rate to trade upon US data?
This afternoon, the pound Australian dollar exchange rate could trade upon further data releases from the US.
Earlier this afternoon, producer price inflation (PPI) in the world’s largest economy printed above forecasts at 0.2% for the month of June, defying expectations – climbing prices amongst producers may deter investors from placing immediate bets on an imminent interest rate cut.
In addition, the Michigan consumer sentiment index is expected to report an improvement in consumer morale in July. Together with the PPI release, the data could boost USD, consequently pressuring the risk-on ‘Aussie’ and buoying GBP/AUD.