Pound to Australian Dollar (GBP/AUD) Exchange Rate Tumbles over 0.50% as UK Inflation Falls Sharply
The GBP to AUD exchange rate weakened sharply on Tuesday after domestic UK data dragged the Pound lower and as minutes published by the Reserve Bank of Australia offered support to the Australian Dollar.
Sterling fell sharply against the majority of its most traded peers including the Euro and US Dollar after the Office for National Statistics published a report, which showed that inflation in the UK dropped more than expected in July.
According to the report released by the ONS, inflation in the UK declined from June’s figure of 1.9% to 1.6% in July.
Economists had been forecasting that the inflation rate would ease to 1.8%; they were taken by surprise by the sharp decline.
The data widely disappointed economists and traders who had been forecasting that interest rates would rise before the end of the year.
The lower inflation rate eased pressure on the Bank of England (BoE) to raise rates. It also leaves open the possibility that it will maintain rates at the record low level of 0.50%.
‘With inflation under control for now, the BoE can keep any hikes gradual and allow the economy to keep growing strongly. Weak wage growth means the BoE now believes that unemployment can fall further without pushing up inflation,’ said an economist from Berenberg Bank.
The ONS said that the biggest single factor driving down Consumer Price inflation was a 5.7% tumble in the cost of clothing between June and July. The cause was likely to have the beginning of summer sales.
‘Alcohol & tobacco prices, overall, fell by 0.7% between June and July this year but rose by 0.6% a year ago. The downward effect came from a range of alcohol products, principally spirits and wine. For both groups, prices fell this year but rose a year ago,’ the ONS said in its report.
In Australia, the Reserve Bank of Australia released the minutes from its last policy meeting.
The report supported the ‘Aussie’ as it showed that the Central Bank will keep interest rates low for the near future and issued no comments on the strength of the currency.
The lack of talking down the currency was seen as positive for it and resulted in the Australian Dollar making gains against many of its most traded peers.
Pound Sterling to Australian Dollar (GBP/AUD) Forecast
Sterling is likely to remain weaker against most of its major peers on Wednesday as today’s disappointing inflation data is likely to continue to weigh heavily.
The ‘Aussie’ meanwhile is likely to experience movement because of RBA Governor Glenn Stevens’s testimony to the Australian Parliament.
The publications of the BoE’s latest policy meeting minutes are also unlikely to offer much in the way of support for the UK currency.
If the minutes show that the BoE’s policy makers are backing down from calling for a rate rise then Sterling will fall further.
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Bolstered by BoE Minutes
The Pound Sterling to Australian Dollar exchange rate is trending in the region of 1.7919.
Prior to the release of the Bank of England (BoE) minutes from its last monetary policy meeting the Australian Dollar strengthened versus the Pound. The Reserve Bank of Australia (RBA) Governor Glenn Stevens gave his semi-annual testimony today in which he voiced his intention to keep the current interest rate. He linked slow economic growth to Australian businesses and their risk aversion tactics in the uncertainty of demand. The refusal to lower interest rates bolstered the ‘Aussie’ (AUD) versus many of its major peers.
Today’s release of the BoE minutes has changed the downward trend for the GBP/AUD exchange rate. The minutes revealed that two of the committee had deviated from the rest in terms of raising interest rates. The change from a unanimous vote seen over the past few meetings has sparked speculation of a sooner-than-expected rate hike. The result has seen the Pound make gains against many of its major peers.
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,0.9330 ,
Australian Dollar,,Pound Sterling,0.5589 ,
Australian Dollar,,Euro,0.6988 ,
Australian Dollar,,New Zealand Dollar,1.1057 ,
US Dollar,, Australian Dollar ,1.0719 ,
Pound Sterling,, Australian Dollar ,1.7888 ,
Euro,, Australian Dollar ,1.4302 ,
New Zealand Dollar,, Australian Dollar ,0.9043 ,
[/table]
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