The Pound to Australian Dollar (GBP/AUD) exchange rate slipped again on Wednesday, striking its worst levels since June 2024, following the publication of Australia’s latest consumer price index.
Pound to Australian Dollar (GBP/AUD): 1.90668 (-0.28%)
Pound to Dollar (GBP/USD): 1.35245 (+0.21%)
Australian Dollar to Dollar (AUD/USD): 0.70932 (+0.49%)
DAILY RECAP:
The Australian Dollar (AUD) rallied strongly on Wednesday, climbing to fresh multi-week highs against several major peers after Australia’s latest inflation figures exceeded expectations.
According to data published by the Australian Bureau of Statistics (ABS), inflation held at 3.8% in January, ahead of forecasts that it would cool to 3.7%.
Another sign that consumer price growth remains stubbornly persistent is reinforcing speculation that the Reserve Bank of Australia (RBA) may need to tighten monetary policy further.
On top of this, a pullback in the US Dollar overnight on Tuesday helped to boost market risk demand on Wednesday, further boosting the ‘Aussie’.
While trading on the defensive against the Australian Dollar, the Pound (GBP) held its ground against most of its other peers on Wednesday morning, amid a modest repricing of Bank of England (BoE) rate cut expectations.
This follows comments from BoE Governor Andrew Bailey on Tuesday in which he suggested the bank’s upcoming interest rate decision in March ‘genuinely remains an open question’.
While most analysts still see the BoE delivering a 25bps cut next month, it no longer looks quite as nailed in following Bailey’s remarks.
Near-Term GBP/AUD Forecast: Political Risk in Focus
Looking ahead to the second half of the week, the upcoming by-election in Greater Manchester poses a potential risk to the Pound Australian Dollar exchange rate.
A failure by Labour to retain the seat is likely to stoke fresh criticism of Keir Starmer’s leadership from within his party and is likely to feed into expectations that the Prime Minister will face a leadership election later in the year.
Meanwhile, in the absence of any notable Australian economic indicators, movement in the ‘Aussie’ through the second half of the week is likely to be tied to market risk dynamics.
If the US Dollar (USD) selling bias persists, this could help the Australian Dollar test fresh highs against the Pound.
