The AUDGBP exchange rate was lower after the UK saw inflation rising above the Bank of England’s 2% inflation rate for the first time in two years. Boris Johnson’s one month delay to the economic reopening has passed a ministerial vote and will go into effect for a month.
The AUD to GBP rate was trading at 0.5437 after the data and is heading for the 0.5422 yearly lows.
Bank of England target breached
The Bank of England s 2% inflation target was topped for the first time in two years as UK inflation hit 2.1%.
The price of fuel was a big reason for the latest May increase, with a rise of almost 20% from last year to push the inflation figure up from April’s 1.5%. Analysts had forecast a gain of 1.8% and the latest number is another sign that the largest economies are seeing prices heating up with the reopening. The CPI jump was the highest in six months.
Consumers in the UK also faced the rising cost of clothing, meals and pub, while online sales of computer games and music downloads were also a contributing factor, according to the Office for National Statistics.
Nomura has said that it expects inflation to peak at 3.2% in the UK, but Capital Economics has said the peak was likely to be lower, at 2.9%. The latest figures will put pressure on the Bank of England to update markets on the removal of stimulus. The central banks have insisted that inflation would be temporary but that is now under pressure as the US, Canada and the UK saw prices running hot.
Boris delay passes, Aussie employment ahead
UK Prime Minister Boris Johnson faced criticism for delaying the reopening of the economy by a month. Fifty-one Tory MPs rebelled by opposing the new regulations, but Labour backed the controversial plans.
The PM has now set the new ‘freedom day’ for July 19th, but critics in his own party are worried that the delays will continue beyond the new reopening date.
The Australian economy will see the release of the latest employment figures on Thursday and the Reserve Bank are always keen to follow the labor market performance. The market is expecting a print of 30k new jobs added, compared to a loss of -30.6k last month. That number was a beat on expectations, but traders were concerned about the level of temporary work roles. The unemployment rate is expected to stay at 5.5.% and that would see the RBA committing to its stimulus actions if hiring doesn’t pick up. The latest Melbourne lockdown will not have helped businesses to feel confident about hiring new staff.
The AUDGBP will look to test the lows at 0.5422 and there is a lot of room underneath that until further support.