The Pound Australian Dollar exchange rate has dropped -0.5% today, following the news that UK earnings are slowing and inflation continues to rise.
Wage growth in January had been predicted to remain unchanged, but the reality saw a drop to 2.6% with and without bonuses.
This slowdown still puts wages above the rate of inflation, but any further narrowing of the gap could trigger greater slumps for the GBP AUD pairing.
Australian ecostats have been broadly supportive in the middle of the week, with new motor vehicle sales falling to -0.9% on the year in January but rising on the month from 0.1% to 0.6%; a lower 0.2% had been previously forecast.
Taking a look forward at possible future Pound Australian Dollar movement, the Bank of England (BoE) response to the latest inflation rate rise is likely to have a high impact on Sterling.
The incoming March 16th BoE interest rate decision is not expected to bring any change to the benchmark 0.25% interest rate.
More important will be remarks from BoE officials such as Governor Mark Carney, who could voice their reaction to rising inflation in January.
At present, it is broadly expected that Carney will remain unconcerned about rising inflation, but if it picks up considerably after February, then he could turn more hawkish in tone.
Australia’s central bank, the Reserve Bank of Australia (RBA), is also in focus for long-term Australian Dollar shifts, with the next RBA interest rate decision coming on March 7th.
Guardian Australia Economist Greg Jericho states that;
‘the market has taken the position that there will be no more interest rate cuts. In November, the market was forecasting the cash rate to stay at 1.5% for the next 18 months; now there is an almost 50% chance of a rate increase by the middle of next year. But that rate rise will only occur if the RBA’s predictions come true’.
Should future RBA forecasts match up with or exceed expectations, then the odds of an incoming RBA rate hike are set to grow along with Australian Dollar demand; at present, another rate freeze at 1.5% has been tabled for March.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound Australian Dollar (GBP AUD) exchange rate was trending in the region of 1.61 and the Australian Dollar Pound (AUD GBP) exchange rate was trending in the region of 0.61.
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