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GBP/AUD Forecast: Pound to Australian Dollar Exchange Rate Under Pressure Ahead of Australian Inflation Data

April 26, 2021 - Written by Frank Davies

Pound (GBP) Exchange Rates Fail to Capitalise on Optimism Over UK Economic Outlook

Optimism over the outlook of the UK economy was not enough to keep the Pound to Australian Dollar (GBP/AUD) exchange rate from shedding ground at the start of the week.

Although the Pound found support against a number of the majors this failed to prevent losses against the more risk-sensitive Australian Dollar.

While markets remain confident in the prospect of a second quarter UK economic recovery a lack of fresh domestic data limited the potential for Pound gains at this stage.

Even though progress towards easing the UK out of its current national lockdown has so far shown signs of success the appeal of the Pound remained relatively muted.

Australian Dollar (AUD) Exchange Rates Rally Thanks to Improved Market Confidence

As March’s US durable goods orders figure fell short of forecast this helped to shore up the Australian Dollar against its rivals.

A smaller-than-expected recovery in the figure helped to encourage demand for higher-yielding assets on Monday.

With the general sense of market risk appetite picking up the appeal of the Australian Dollar naturally improved.

As markets adopted a more positive outlook on the global economic outlook, in spite of ongoing Covid-19-based disruption, AUD exchange rates were able to push higher across the board.

GBP/AUD Exchange Rate Forecast: Rising Australian Inflation Set to Boost Australian Dollar

The release of the first quarter Australian inflation data could push the Australian Dollar higher still on Wednesday.

With forecasts pointing towards the headline inflation rate picking up from 0.9% to 1.4% on the year demand for the Australian Dollar looks set to increase.

Evidence of rising inflationary pressure could give the Reserve Bank of Australia (RBA) greater cause for confidence in the coming months.

While the RBA does not look likely to raise interest rates in the near term any fresh increase in inflation could encourage policymakers to take a more hawkish outlook.

On the other hand, if the inflation rate does not rise as far as anticipated this could leave the Australian Dollar on the back foot against its rivals.

Demand for the Pound, meanwhile, could pick up in response to April’s CBI distributive trades index.

As long as the UK retail sector continues to demonstrate evidence of a strong second quarter recovery the Pound to Australian Dollar exchange rate could return to a positive footing.
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