The Pound to Australian Dollar (GBP/AUD) exchange rate gave up recent gains and slipped to a 3-day low after data showed that inflation in the UK slowed to match its lowest level in five years.
Concerns over Thursday’s Scottish referendum vote are also weighing heavily upon the Pound. With the outcome of the referendum too close to call investors are concerned over the potential impacts of Scotland leaving the UK.
Despite those worries, Sterling was also hit by the release of inflation data from the Office for National Statistics (ONS). According to the data, the UK’s annualised rate of consumer price growth fell from 1.6% to 1.5% in July as food prices fell because of a price war by the supermarkets.
The Pound fell following the data’s release as economists forecasted that the lower rate of inflation would ease pressure upon the Bank of England to raise interest rates as soon as expected.
‘Inflation is still on a downward trend despite the economic recovery’s strength. Although the low inflation outlook is unlikely to prevent the Monetary Policy Committee from raising interest rates entirely over the next couple of years, it should limit the speed at which they rise,’ said Samuel Tombs, senior UK economist at Capital Economics.
The Australian Dollar was able to regain ground against the Pound after it was weakened earlier in the session by the publication of the minutes of the Reserve Bank of Australia’s (RBA) latest policy meeting minutes.
Policy makers said that the Australian Dollar was still too high to achieve its desired domestic economic outcomes. Following the publication of the minutes, the ‘Aussie’ fell against the US Dollar (USD) and other major peers.
As the session progressed, the minutes began to offer some support as economists saw comments made over the strength of the Australian housing market could spur the central bank to raise interest rates in order to stop the market from overheating.
‘It looks like the RBA has a focus on housing and that they don’t want the housing market to overheat, and one way to do that is to lift interest rates, that gave a little boost to the Australian Dollar even though it was not clear cut,’ said a forex trader Francisco Solar.
Pound Sterling to Australian Dollar Exchange Rate Forecast
The GBP/AUD exchange rate is forecast to remain under pressure up until Thursday.
If Scotland votes in favour of independence, we can expect the Pound to fall sharply against the majority of its major peers.
Even if Wednesday’s UK unemployment data and latest BoE monetary policy meeting minutes come in positively and hawkish the Pound is still likely to remain under pressure.
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,0.9019 ,
Australian Dollar,,Pound Sterling,0.5570 ,
Australian Dollar,,Euro,0.6969 ,
Australian Dollar,,New Zealand Dollar,1.1057 ,
US Dollar,, Australian Dollar ,1.1087 ,
Pound Sterling,, Australian Dollar ,1.7951 ,
Euro,, Australian Dollar ,1.4349 ,
New Zealand Dollar,, Australian Dollar ,0.9043 ,
[/table]
The Pound Sterling to Australian Dollar exchange rate is currently trending in the region of 1.8002.
The Pound to ‘Aussie’ (AUD) exchange rate reached a fresh monthly high at the beginning of the European session after the Reserve Bank of Australia suggested that an overvalued currency is the primary reason for the Australian economic struggles.
Despite many traders holding off investment in Sterling until the Bank of England publishes the minutes from their most recent policy meeting; the Pound has rallied against the ‘Aussie’. This could be attributed to the dismal performance of the South Pacific currency of late, but also may be a sign that traders don’t expect anything detrimental to surface in the all important BoE minutes.
