Limited Inflation Rate Growth Leaves AUD/GBP Exchange Rate Close
The Australian Dollar has traded in a narrow range against the Pound today, following the news that AU inflation hasn’t risen by as much as expected.
The Q4 figures have shown rising inflation for the year-on-year reading, from 1.8% to 1.9%. For the quarter-on-quarter figure, inflation has remained static at 0.6%.
While the annual increase was positive news, it wasn’t as good as the predicted 2% reading. The quarterly reading also disappointed by not rising to 0.7% as expected.
Australian Dollar traders have been considering these inflation stats in the context of the Reserve Bank of Australia (RBA), the nation’s central bank.
The issue is that with inflation failing to rise in line with forecasts, this doesn’t put much pressure on the RBA to consider higher interest rates.
Summarising the problem, Deutsche Bank Chief Australian Economist Adam Boyton said;
‘With inflation remaining inconsistent with the RBA’s target, and the household sector only just showing the earliest signs of recovery, we see no reason for the RBA to act in an overly pre-emptive — and potentially ‘risky’ — fashion with a too early series of rate hikes.
The RBA is, after all, an inflation-targeting central bank with a financial sector stability mandate’.
Limited Pound to Australian Dollar Movement Down to Brexit Damage Concerns
The Pound to Australian Dollar exchange rate has been close today, owing to a mixture of UK economic factors lowering confidence in the UK economy.
The primary issue has been the leak of a government Brexit forecast, which suggests that the UK economy will be damaged regardless of the type of trade deal secured.
Although there has been a defensive reaction from the government, Pound traders have still been considering the possibility of the nation suffering during Brexit.
The counterargument is that the leaked report doesn’t include estimates for the government’s preferred post-Brexit trade deal, which could limit economic losses.
UK Consumer Confidence Rises, Limiting GBP/AUD Losses
Today has seen the release of relatively positive UK economic data, which has been the GfK consumer confidence reading for January.
This has shown an improvement from -13 points to -9, which was unexpected.
Warning that this could be a one-off, GfK Head of Market Dynamics Joe Staton said;
‘In the absence of good news about rising wages and declining inflationary pressures, this off-trend number could be a temporary blip rather than a strong sign of recovery’.
AUD/GBP Exchange Rate Forecast: Australian Dollar Drop possible on Manufacturing Data
The Australian Dollar may decline against the Pound in the near-term, when the AIG manufacturing index comes out on Wednesday morning.
This is forecast to show a dip from 56.2 points to 54.4, which would indicate slowing economic activity in the sector.
In a similar turn of events, the UK manufacturing PMI for January will be out on Thursday afternoon.
Unlike the Australian reading, this is tipped to show minor growth during the month, so the Pound could appreciate on the news.