Pound Australian dollar (GBP/AUD) exchange rate strengthens on sticky UK inflation

Pound Australian dollar (GBP/AUD) exchange rate rallies as hot UK inflation dampens BoE rate cut bets

(Updated 16:15, 18/09/24) After a muted start to the session, the pound Australian dollar (GBP/AUD) exchange rate eventually managed to climb higher today in the wake of the UK’s latest consumer price index.

August’s CPI figures showed a sharp rise in underlying inflation last month, with the core rate jumping from 3.3% to 3.6%, higher than the forecast 3.5%. In addition, services inflation accelerated from 5.2% to 5.6%, while headline inflation held at 2.2%, above the Bank of England’s (BoE) 2% target.

The latest figures could set alarm bells ringing among BoE policymakers as they continue their battle against inflation. Rising services and core inflation could mean that price pressure remain persistent for quite some time.

This in turn has cemented bets that the British central bank will leave interest rates unchanged at tomorrow’s policy meeting, thereby boosting the pound (GBP).

Original article continues below:

Pound Australian dollar (GBP/AUD) exchange rate steady following UK CPI

The pound Australian dollar (GBP/AUD) exchange rate is rangebound this morning, despite a hotter-than-forecast UK consumer price index, as a positive market mood underpins the Australian dollar (AUD).

At the time of writing, GBP/AUD is trading at AU$1.9484, virtually unchanged from this morning’s opening rate.

Pound (GBP) buoyed by hot inflation

The pound (GBP) is gaining ground against many of its rivals today, although it is unable to push higher so far against the ‘Aussie’, following a stronger-than-expected UK CPI.

The latest figures from the Office for National Statistics (ONS) contained signs of persistent price pressures in the UK. While headline inflation held at 2.2% in August, as expected, core inflation jumped from 3.3% to 3.6% – higher than the forecast 3.5%.

Meanwhile, services inflation – which is closely watched by the Bank of England (BoE) – rose from 5.2% to 5.6%.

The data has cemented bets that the BoE will leave interest rates unchanged at tomorrow’s meeting, which in turn is boosting the pound.

Australian dollar (AUD) supported by risk-on mood

Meanwhile, the risk-sensitive Australian dollar is garnering support today from an upbeat market mood.

Investors are hopeful that the Federal Reserve will cut interest rates at its policy meeting this evening, thereby lowering global borrowing costs and hopefully spurring growth.

This, in turn, is leading to a risk-on market sentiment and providing the ‘Aussie’ with support.

In addition, rising commodities prices are also increasing the resource-linked currency’s appeal.

GBP/AUD exchange rate forecast: BoE decision to boost the pound?

Looking ahead, the pound Australian dollar exchange rate could face some volatility in the near future, with some high-impact events incoming.

This evening we have the Federal Reserve rate decision, where the US central bank is widely anticipated to begin its cutting cycle. An upbeat market mood in the wake of the decision could boost the ‘Aussie’.

AUD investors will then turn their attention to the latest Australian employment data. Any signs of a slowing labour market could weigh on the Australian dollar.

For the pound, tomorrow’s BoE decision is the main event. If the bank leaves rates unchanged, as expected, GBP could enjoy support.

Investors will also look to the bank’s policy statement and press conference for fresh impetus. Hints that policymakers are worried about persistent inflation could boost the pound.

Samuel Birnie

Contact Samuel Birnie


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