AUD GBP Slumps as Recovery Loses Steam

AUD GBP Struggles for Direction with Retail Sales Due

The AUD GBP exchange rate was lower by 0.64% on Tuesday as traders put the brakes on the Australian recovery expectations. The pair also moved higher as traders tried to pull rate hike expectations forward for Australia but are now seeing that the BoE will still be ahead.

The AUD GBP exchange rate was trading at 0.533 ahead of the Westpac consumer data.

UK sees grocery inflation at 14-month highs

Grocery inflation in the UK has hit a 14-month high, according to market research group Kantar. The company said prices had risen by 2.1% in the four weeks to October 31st, its highest level since August 2020.

Fraser McKevitt, head of retail and consumer insight at Kantar, said rising prices are leading shoppers to hunt around for deals.

“Grocery prices are rising and this month inflation hit its highest rate since August 2020, when retailers were still cutting promotions to maintain stock on the shelves.

As prices increase in certain categories, we can expect shoppers to continue to visit several supermarkets and shop around to find the best deals. Already, households visit an average of 3.3 supermarkets per month in order to find the best value for money.”

The group also reported that shoppers are moving early for Christmas supplies and may yet see another government-driven panic buy as the festive season approaches. Government officials have planted the seed of a hard Christmas but stated that supplies would be fine. We saw with the petrol issue that their assurances had little effect.

Households are being squeezed by multiple flash points with energy prices higher, oil prices at highs, and hot inflation. This will hit the UK economy in coming quarters, according to NIESR.

Largest Australian bank sees boom, but warns of inflation

Economists at Australia’s largest retail bank are expecting a strong economic rebound but have also warned of a build-up in inflation pressures leading to the RBA lifting the cash rate before the end of 2022.

Commonwealth Bank of Australia’s household spending intentions index rose by 6.6% in October, as lockdown restrictions were lifted in the country.

“I think the reopening is going to see an increase in spending that is sustained well into 2022,” CBA chief economist Stephen Halmarick said.

“We do think we will get a build-up of some inflationary pressures next year … moving up faster and more broadly than the Reserve Bank believes.”

CBA expects underlying inflation will be around 2.5% by the middle of next year – the mid-point of the RBA’s two to three per cent target.

“November next year we have got the first rate hike,” Mr Halmarick predicted.

The comments coincided with the weekly ANZ-Roy Morgan consumer confidence index, which which rose 0.6 per cent, the eighth gain in nine weeks. That is a good indicator ahead of the Westpac consumer confidence figures.

“Since its recent low in early August, consumer confidence is up a touch over 10 per cent and is getting close to its long-run average,” ANZ head of Australian economics David Plank said.

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