The pound Australian dollar (GBP/AUD) exchange rate continues to weaken today ahead of the release of the US core PCE price index. The data is likely to influence the wider currency market, given the fact of the US economy being the world’s largest; the PCE index is highly significant to the country’s interest rate trajectory.
At the time of writing, GBP/AUD is trading at A$1.9431, marginally depressed compared with today’s opening levels.
Australian dollar (AUD) uptrend extended despite Chinese data
The Australian dollar (AUD) continues to firm into today’s European session, despite the release of disappointing Chinese data overnight.
The country’s industrial profits printed at 0.5% for the month of August rather than the 3.5% expected, amid fragile economic recovery due to weak demand, disinflation risks, and a property downturn. Given the close trading relationship between Australia and China, weak Chinese data often weighs upon AUD.
Nevertheless, the ‘Aussie’ remained strong, buoyed by continually hawkish rhetoric from the Reserve Bank of Australia (RBA). The central bank reiterated on Tuesday that policy must remain restrictive until inflation is reliably moving towards the target range.
Moreover, economic stimulus measures introduced in China by the country’s own central bank suggest a hoped-for recovery in economic growth. The People’s Bank of China (PBOC) has announced it will lower borrowing costs and allow banks to increase their lending, offering support to both the Chinese yuan (CNY) and AUD.
Pound (GBP) trades mixed following upbeat data release
The pound (GBP) is trading in a mixed range against its peers today as the latest distributive trades report impressed.
September’s report from the Confederation of British Industry (CBI) printed at 4 rather than -19 as forecast: a considerable improvement from August’s -27. According to the CBI, internet sales surged sharply, although supplier orders dropped and stocks were considered too elevated.
A lack of additional UK data limits Sterling tailwinds, however – ahead of the release of this afternoon’s US inflation data, markets have turned bearish. Moreover, investors and economists alike continue to mull over Bank of England (BoE) governor Andrew Bailey’s recent comments regarding monetary policy.
Bailey told reporters that ‘the path for interest rates will be downwards, gradually’, indicating confidence that UK inflation will return to target in the coming months. Such a statement reinforces expectations that the UK central bank will cut interest rates before the end of the year.
GBP/AUD exchange rate forecast: US data in the spotlight
The pound Australian dollar exchange rate will likely trade this afternoon upon the outcome of the US core PCE price index.
If inflation remained unchanged in August according to the latest reading, US dollar (USD) sentiment could rally – if prices failed to fall further last month, persistent inflationary pressures could be surmised.
On the other hand, a figure of 0.2% signals only a marginal increase in costs. The annualised data, moreover, is expected to print at 2.3% from 2.5% in July.
Weakness in the ‘Greenback’ could lend support to both the ‘Aussie’ and the pound, as USD rivals. The consideration of dovish action from the Federal Reserve is likely to paint both the RBA and the Bank of England in a hawkish light, supporting the two currencies.