The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate weakened to its lowest level in more than a week after the Bank of England’s Inflation Report showed that the BoE expects interest rates will remain low for a longer period and that inflation is expected to fall to just 1.1% in the first part of next year.
Earlier in the session the Pound ticked higher against several major peers after data showed that UK unemployment fell by 115,000 but the overall unemployment rate remained at 6% and that wage growth increased more than inflation for the first time in five years.
‘This is still really more to do with low inflation than markedly improving earnings. However, earnings growth did take a much-needed decent step in the right direction in September,’ said Howard Archer, chief UK economist at IHS Global Insights.
Sterling then went onto the retreat against a number of major peers after the BoE cut its forecast for economic growth and said that inflation is likely to fall below 1% by the first quarter of 2015 as the weakness of the Eurozone drags upon the UK economy.
‘The central path is a little weaker than in August, reflecting the weaker global outlook and a softer profile for private sector domestic demand. The main downside risk stems from weaker Euro-area activity, which would weigh on UK exports,’ said BOE governor Mark Carney.
Despite the cut to forecasts today’s BoE growth forecasts were stronger than expected: the Bank says GDP will rise 3.4% this year, 2.7% next year and 2.6% in 2016.
The Australian Dollar meanwhile strengthened as it found support from data, which showed that consumer confidence in the Oceanic economy increased in November from October. Westpac’s consumer sentiment index rose by 1.9% over the month.
On Thursday the Australian Dollar held onto gains against the Pound after a report released by the Melbourne Institute said that inflation expectations for Australia rose to 4.1% in October from 3.4% the previous month.
Sterling continued its decline against the Australian Dollar and was looking likely to slip below the 1.80 level and a fresh 2-month low.
As the session continued the GBP/AUD exchange rate continued to weaken broadly.
GBP/AUD Losses Slow
The ‘Aussie’ gave up some of its gains against the Pound and went back onto the retreat against the US Dollar after Australian economists warned that the country is heading towards a recession next year. They blame the ending of the mining boom and slowing Chinese economy for the nation’s economic weakness. The economists also warned of an imminent housing bubble collapse.
GBP/AUD Exchange Rate Forecast to Fall Below 1.80
The Pound was close to sliding below the 1.80 level against the Australian Dollar on Friday as worse than forecast construction output data weighed heavily and as the ‘Aussie’ received support from increased demand for higher yielding riskier assets following the release of soft but improved Eurozone GDP data.
Australian Dollar (AUD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Australian Dollar,
,US Dollar,0.8030 ,
Australian Dollar,,Pound Sterling,0.5566 ,
Australian Dollar,,Euro,0.6985 ,
Australian Dollar,,New Zealand Dollar,1.1059 ,
US Dollar,, Australian Dollar ,1.1492 ,
Pound Sterling,, Australian Dollar ,1.7967 ,
Euro,, Australian Dollar ,1.4311 ,
New Zealand Dollar,, Australian Dollar ,0.9042 ,
[/table]
