GBP AUD Exchange Rate Surges as UK CPI Data Impresses

October 19, 2016 - Written by John Cameron

STORY LINK GBP AUD Exchange Rate Surges as UK CPI Data Impresses

The GBP AUD exchange rate rocketed up by around a cent this afternoon as markets responded to better than expected UK inflation.

Pound (GBP) Exchange Rate Bolstered by CPI Data

The Pound (GBP) advanced against the Australian Dollar today after the UK’s consumer price index rose to 1.0% for the month of September surpassing expectations of a 0.9% rise.

The jump from 0.6% is the largest month-on-month increase since June 2014, but it is predicted to rise further as the low value of the Pound drives prices up. There have been warnings that Britain’s inflation will see a significant rise over the next year, with the chief UK economist at Pantheon Macroeconomics, Samuel Tombs saying;

‘September’s jump in CPI inflation is a wakeup call to markets and the MPC that Britain is heading for a prolonged period of high inflation fuelled by rising energy and import prices. All told, CPI inflation likely will average 3% next year and peak at about 3.5% at the end of 2017.’

Further signs of this are likely to show as we head into 2017 and business currency hedges, which allowed companies to fix an exchange rate at the beginning of the year before the Pound’s slump, come to an end.

Pound Australian Dollar Gains Likely to be slowed by ‘Brexit’ Fears

The Pound is likely to remain weakened by ‘Brexit’ anxiety however as investors fear that the UK Government is headed towards a ‘hard Brexit’. In which Britain will lose access to the single market in exchange for stronger controls on immigration.

This has not been helped by recent reports of a dispute in the British cabinet as Chancellor Philip Hammond is accused of attempting to delay immigration talks, as he pushes for the UK to retain access to the free market.

Australian Dollar (AUD) Dips as Fed Rate Hike Bets Apply Pressure

The Australian Dollar (AUD) tumbled against the Pound today as risk appetite subsided following an increase in demand for the US Dollar (USD) as bets rise for a December rate hike from the Federal Reserve.

AUD was also weakened by dovish remarks from Reserve Bank of Australia governor Philip Lowe as he indicated that further interest rate cuts to unprecedented lows could be possible depending on the state of the job market.

However the Pounds current advances against the ‘Aussie’ may be short-lived as trade prices remain high following positive PPI data from China last week and ‘Brexit’ continues to dictate market sentiment towards the Pound.

GBP AUD Exchange Rate Forecast: Pound may Rise as Commons to get ‘Brexit’ Vote

The GBP AUD exchange rate may rise if recent reports that there will now be a parliamentary debate on ‘Brexit’ prove to be true. This may help reverse the damage done to the Pound last week as calls for a vote from MPs were rejected by Prime Minister Theresa May as she said that the government would have final in ‘Brexit’ negotiations.

The UK will also release its unemployment reports tomorrow which may also strengthen Sterling against the Australian Dollar if the data is positive, especially as there will be little Australian data to counteract it.

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TAGS: Australian Dollar Forecasts Currency Predictions Pound Ste Forecasts