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Best Pound to Australian Dollar Exchange Rate in One Month as UK Inflation Prompts GBP Investors

September 12, 2017 - Written by John Cameron

The Pound to Australian Dollar exchange rate is holding the previous day's gains, quoted at 1.65863 (+0.07% on the day) on Wednesday 13th September.

GBP/AUD surged Tuesday morning as currency markets sentiment was upbeat following the release of the UK’s latest Consumer Price Index (CPI).

Pound Sterling (GBP) Climbs as Inflation Beats Expectations

Sterling sentiment skyrocketed this morning as the UK released better than expected CPI figures, leading to speculation that the Bank of England (BoE) may soon be forced to raise interest rates.

According to figures published by the Office for National Statistics (ONS) Britain’s’ inflation rate leapt from 2.6% to 2.9%, outpacing expectations that it would only reach 2.8% and matching the four-year high seen in May.

Markets hope that the surge in inflation will push the BoE towards tightening its monetary policy and raising interest rates from an all-time low, in order to ensure that inflation remains under control and does not constrain consumer spending too much.

While some analysts suggest that the sharp rise in inflation is unlikely to be sustainable as it a consequence of the Pound’s recent devaluation, some experts argue that Sterling’s Brexit losses may not be entirely priced into inflation yet and that it could rise further over the coming months.

Former Bank of England policymaker Andrew Sentence said;

‘With very well-developed and complex supply chains, it can take a number of years for a decline in the exchange rate, which raises import prices, to feed through fully to consumers.’

‘This suggests that the recent squeeze on consumer spending from higher inflation will continue to dampen growth in the UK economy in the second half of this year and next year. There is not much sign yet that consumers will get any early relief from the surge in inflation following the Brexit vote last summer.’

Whatever the outcome all eyes will now be on the BoE ahead of its latest monetary policy meeting later this week as investors look to the bank to see what moves it will make in order to prevent household finances from deteriorating any further.

Australian Dollar’s (AUD) Weakened as Business Confidence Plummets

Meanwhile the Australian Dollar found itself weakened during the Asian trading session this morning as National Australia Bank (NAB) released its latest domestic business sentiment data.

Markets were left disappointed as the latest confidence index tumble from 12 to 5 in August, its lowest rate in almost a year and well below the more modest fall to 9 that analysts had predicted.

The drop appeared to be largely prompted by the rising costs faced by firms as both input and wage costs continue to place pressures on profit margins.

NAB chief economist Alan Oster said;

‘For those indicating deterioration in confidence, the biggest concerns appear to be customer demand, government policy, as well as cost pressures – both energy and wages.’

‘While we do not know how the significance of each factor has evolved at this juncture, the results provide an interesting insight into what is at the forefront of business concerns in Australia.’

GBP AUD Forecast: Sterling to Climb Further as UK Wages Rise?

Looking ahead the GBP AUD exchange rate is likely to rise tomorrow as the ONS publishes the UK’s latest employment data, with the jobless rate forecast to hold a 42-year low.

However the expected jump in the Pound tomorrow is more likely to be driven by the accompanying wage figures as economists predict that average earning will have climbed from 2.1% to 2.3% in July, helping to close the gap in real wages caused by soaring inflation.

Meanwhile the Australian Dollar may attempt to recoup some of its losses overnight as Westpac releases its domestic consumer confidence figures, which is expected to show a slight uptick in household sentiment in September.

Current Interbank Exchange Rates

At the time of writing the GBP AUD exchange rate was trending around 1.6537 and the AUD GBP exchange rate was trending around 0.6045.

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