AUD GBP Higher after Inflation Data, Sunak Budget Ahead

AUD GBP Higher after Inflation Data, Sunak Budget Ahead

The AUD GBP exchange rate was trading at levels not seen since July after inflation came in slightly lower. The data was the highest in 6 years despite the recent lockdowns and will start rate talk for the Aussie dollar.

The AUD GBP exchange rate is trading at 0.5440 ahead of the UK Autumn budget, which will be delivered by Rishi Sunak.

Australian inflation

Australian core inflation saw its fastest annual pace since 2015 in the September quarter as price increases grow. The data was a surprise that led markets to wager on earlier hikes in interest rates.

Data from the Australian Bureau of Statistics showed the headline consumer price index (CPI) rose 0.8% in the third quarter and 3.0% for the year. However, the trimmed mean measure of core inflation favoured by the Reserve Bank of Australia (RBA) rose 0.7% in the quarter, above analysts’ forecasts of 0.5%.

The annual pace accelerated to 2.1%, which was much higher than the 1.8% expected and putting it back in the RBA’s 2% to 3% target range for the first time in six years.

The central bank had said core inflation would not reach 2% until mid-2023 and, in turn, that cash rates would remain at record lows of 0.1% right out to 2024. That was always questioned by traders and the bank’s governor even criticized markets for pricing in an earlier hike.

The latest data will see support for the Aussie after the recent reopening in the key cities.

What to look for in the Rishi Sunak Autumn budget

UK Chancellor Rishi Sunak will deliver this year’s Autumn Budget for the British economy. The government has revealed a few of its planned announcements, but businesses are keen to hear the rest of the speech in light of recent economic constraints.

Rishi Sunak appeared on the Andrew Marr Show on Sunday and said that ‘strong investment in public services’ would be central to the Budget. The Guardian newspaper has also hinted at a fund to attract overseas investment in the UK economy.

The government played a smart move by hiking national insurance ahead of the budget and that will be a distant memory as businesses ask: “What have you done for me lately?”

For households, there is an expected move on the pension triple lock, which may be suspended for a year. The triple lock ensures that pensions keep pace with inflation, wage earnings, or a 2.5% figure- whichever is highest. The government has said it will delay this for a year because inflation is higher than they would like, but as with many government decisions, it will likely be extended beyond a year.

The public sector is looking for an end to the pay freeze, but this again will see any gains wiped out by inflation. Some measures to tackle the looming threat of higher energy bills is also possible.

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