Weetabix Announce Price Rise, GBP AUD Exchange Rate Slides

January 30, 2017 - Written by Frank Davies

STORY LINK Weetabix Announce Price Rise, GBP AUD Exchange Rate Slides

The Pound to Australian Dollar made a sturdy recovery from its weekly lows of 1.6446 on Tuesday afternoon. At the time of updating, GBP/AUD was up over 0.2%.

Demand for the Australian Dollar plunged on Tuesday afternoon as investors sought out ‘safe haven’ currencies amid fresh Trump jitters. Sterling also strengthened as UK MPs discussed the Article 50 bill in depth in Parliament.

[Previously updated 30/01/2017]

The Pound dropped against the Australian Dollar from its best levels this morning as Weetabix announced that it would have to raise prices in 2017 due to the fall of Sterling.

Pound Australian Dollar (GBP AUD) Drops as Consumers Face Price Hikes

The Pound Australian Dollar (GBP AUD) exchange rate tumbled this morning in response to a warning from Weetabix that it would likely need to raise prices this year, adding to the long list of companies who have announced price hikes in 2017 due to the fall in the value of Sterling following the UK’s vote to leave the EU last year.

While Weetabix sources nearly all of its ingredients from the UK, wheat prices are priced in US Dollars (USD), causing the company's costs to soar as the Pound weakens.

It is hardly likely to be the last company to raise prices either, with investors becoming increasingly concerned that the accelerated rate of inflation in Britain will cause consumer spending to plummet in 2017.

With strong consumer spending being seen as a key contributing factor in the resilience of the UK economy since the Brexit vote, it is particularly worrying for investors.

Strong Iron Ore Prices Bolster Australian Dollar

The Australian Dollar rose this morning as it was strengthened by buoyant iron ore prices despite a slowdown in the Chinese market.

With Lunar New Year celebrations well underway in China, most investors expected that a dramatic decline in activity would cause commodity prices to slump, yet iron ore appears to have defied expectations and currently sits around $83.34 a tonne, just shy of a multi-year high of the $83.65 a tonne it reached earlier in the month.

However, further gains may elude iron ore as trade in Chinese futures remains closed until Friday, which will leave the commodity without one of the main driving forces behind its recent advance.

GBP AUD Exchange Rate Forecast: UK Consumer Confidence Report Ahead

The GBP AUD exchange rate may deprecate further early tomorrow morning as the UK’s Consumer Confidence survey is released by Gfk. Investors predict that it will show a drop in consumer sentiment as British households face the prospect of rising prices and uncertainty over the Brexit process.

Meanwhile the Australian Dollar may also struggle to advance tomorrow as analysts forecast the latest domestic business survey will report a fall in confidence in December.

On the political front the Pound is also likely to struggle as the government prepares to push through its Brexit bill next week, with it likely to pass through parliament with little trouble unless a substantial number of Labour MP’s rebel against Jeremy Corybn’s three-line whip to back the bill.

Current Interbank Exchange Rates

At the time of writing the GBP AUD exchange rate was trending around 1.66 and the AUD GBP exchange rate was trending around 0.60.

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TAGS: Australian Dollar Forecasts Pound Sterling Forecasts