The Pound-Australian Dollar rate could recover if risk appetite deteriorates ahead of Jackson Hole, although stronger RBA rate expectations may keep the Aussie supported.
The Pound to Australian Dollar (GBP/AUD) exchange rate fell just shy of a two-month low on Wednesday, following the publication of Australia’s latest consumer price index.
At the time of writing, GBP/AUD was trading at AU$1.8985. Down around 0.4% from the start of Wednesday’s opening levels.
DAILY RECAP:
The Australian Dollar (AUD) rallied on Wednesday as Australia’s latest monthly CPI print showed inflation outpaced expectations in July.
According to data published by the Australian Bureau of Statistics (ABS), headline inflation cooled from 3.8% to 3.5% year-on-year in July, beating forecasts it would fall as low as 3.3%.
Signs that inflationary pressures may be more persistent than previously thought raised bets that the Reserve Bank of Australia (RBA) may resume its tightening cycle sooner-rather-than-later.
This saw the ‘Aussie’ climb as a greater number of AUD investors now view the RBA’s next meeting in September as ‘live’, particularly if upcoming economic releases continue to outpace expectations.
The Pound (GBP) trended broadly lower on Wednesday, as a 4% rise in the UK’s energy price cap thrust cost-of-living concerns back in the spotlight.
While the rise in the energy price cap doesn’t come as a surprise amid the continued disruption to energy exports in the Gulf, GBP investors fear this could place fresh pressure on households at a time when the UK economy appeared to be turning a corner.
On the other hand, the jump in energy prices is likely to lift inflation, which increases the odds of the Bank of England (BoE) needing to tighten monetary policy later in the year.
Near-Term GBP/AUD Forecast: Cautious Mood to Undermine the ‘Aussie’?
Turning to the second half of the week, the Pound Australian Dollar exchange rate may mount a recovery as the absence of any notable UK or Australian data will likely see movement increasingly dictated by market risk sentiment.
In addition to the ongoing geopolitical uncertainty caused by the expansion of US economic sanctions on Iran, market risk appetite may also be undermined by a sense of caution ahead of the Federal Reserve’s annual Jackson Hole symposium.
This caution could lead investors to shun more risk-sensitive assets like the ‘Aussie ‘, allowing GBP/AUD to claw back Wednesday’s losses.
Our currency coverage draws on live market data, official economic releases and published bank research.
