The AUDGBP exchange rate was -0.15% lower on Wednesday despite the latest Australian inflation rate coming in at 3.8%. The Aussie dollar is reeling from an extension to the Sydney lockdown, while the UK saw seven days of lower virus cases with the full reopening of the economy.
The AUD to GBP pair trades at 0.5290 and shrugged off a drop in housing prices in the UK.
Australian inflation soars without fruit pickers
Australian inflation tripled in only three months as a lack of backpackers pushed fruit prices higher.
The consumer price index in the June quarter jumped to a 13-year high of 3.8%, up from 1.1% in the March quarter. The number was in line with analysts’ expectations but raises the prospect of earlier rate rises from the RBA.
The closure of Australia’s borders is starting to have an effect, with farmers no longer able to rely on overseas backpackers during the harvest season. Fruit prices for the three months surged by 4.7% as vegetable prices climbed by 5.5%.
“Both rose due to a shortage of pickers, extreme rainfall on the east coast of Australia and Cyclone Niran affecting banana crop yields,” the Australian Bureau of Statistics said.
ING Bank was more relaxed about the figure with the company’s analysts seeing the number being dismissed as “transitory,” which has been the favourite central banker word of late.
“We can’t see the Reserve Bank of Australia (RBA) being too alarmed by this data. They have made it quite clear that they anticipated a short-lived spike in inflation above the upper bound of their target and were unlikely to be moved by this,” the bank said.
UK house prices fall as tax cuts are scaled back
British house prices dropped in July after the coronavirus emergency tax break was scaled back at the end of June. However, demand for larger homes driven by the pandemic is likely to support the market, according to Nationwide.
In the monthly figure, house prices dropped by 0.5%, which marked the first fall since March. That slowed the annual increase to 10.5% from the June figure of 13.4% which was the fastest rise in 17 years.
Nationwide chief economist Robert Gardner said the June rush to catch the full tax break meant that savings from the incentive had been dwarfed by the surge in prices.
Under the scheme, the first £500,000 of any property purchase in England or Northern Ireland was exempt from the stamp duty tax until the end of June. That figure then dropped to a £250,000 tax-free allowance, which will remain in place through September.
The British pound was finding strong support from the ongoing drop in virus cases with the country seeing seven days of lower numbers. That run was broken on Wednesday with a recorded 27,000 cases. The UK is still in a better place than Australia with the country on tenterhooks for every case recorded.