AUD GBP Higher as UK Inflation Dips Slightly

AUD GBP Weakness Returns with UK Rate Talk

The AUD GBP exchange rate was 0.37% higher on Wednesday after the UK inflation rate came in lower than analysts’ forecasts. The latest figures may cool the recent market reaction to higher interest rates in the near future for the UK, but there are still price pressures ahead.

The AUD to GBP exchange rate was trading at 0.5435 as it continues above the key resistance at 0.5400.

Australian economy receives positive job postings boost

Treasurer Josh Frydenberg said on Wednesday that the Australian economy had received some “further positive economic data” on the number of job vacancies available.

“Job ads were up 4.9 per cent for the month with the strongest growth in New South Wales, job ads up 16 per cent,” Mr Frydenberg said.

“We have seen data from the Nationals Skills Commission which demonstrates that businesses are rehiring as their doors are reopening.

“And we know that the Australian economy will rebound strongly as a result of the economic support that we have put in place and as a result of the restrictions easing across the country.”

Frydenberg also said that consumer confidence was “up for the sixth week in a row”.

The figures will raise hopes for a swift recovery after the damage of the recent government lockdowns.

However, a report by Deloitte was critical of the country’s economy in its sophistication index. It is “pigeonholed as an economy about rocks, crops and cameras (tourism)”, according to and report author Dr Pradeep Philip, who said Australia had “traded economic sophistication and resilience for short-term sugar hits”.

UK inflation dips and cools rate hike chatter

The UK economy saw the release of the latest inflation data with a move to 3.1% from 3.2%. Analysts had expected the figures to hold steady at 3.2%.

The latest figures will cool the bond market panic as traders rushed to unwind their bearish bets on UK rates. The figures may also take the pressure off the Bank of England to act in November or December, with the chance of a hike now priced into the markets.

“We expect inflation to remain high and volatile in the short-term, but we do not expect an imminent rise in interest rates from the Bank of England,” said Hannah Audino, economist at PwC.

PwC expects the current inflationary pressures to be transitory and to gradually fade as supply bottlenecks and shortages reduce and energy prices cool. Although, the group said that the Brexit effect may mean these pressures persist for longer in the UK than other economies.

“With some sectors in stress due to shortages and others in slack, it is difficult for the Bank to know which way to turn with monetary policy,” says Audino.

Further commentary from Hargreaves Lansdowne said: “Inflation is making a mockery of savings rates. The highest rate on the market right now is 2.05%, if you fix for five years,” said Sarah Coles, personal finance analyst.