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GBP/AUD Exch Rate Slides over Inflation

The Pound Sterling Australian Dollar exchange rate slipped by around -0.3% in the forex exchange market on Wednesday. The pairing was trading at around AU$1.9058.

The risk-sensitive AUD edged higher as risk appetite gained ahead of the US Federal Reserve monetary policy meeting.

Traders were moving away from the safe-haven US Dollar and towards riskier assets.

The weakening of the Dollar and the strengthening of the commodity-linked currencies suggest that risk appetite may have remained supported. The optimism due to several economies beginning to loosen restrictive measures may have also helped.  This was according to JFD Group’s senior market analyst, Charalambos Pissouros.

Data showed that Australia’s first-quarter inflation jumped to its highest level in over five years.

However, the long-desired pickup in inflation may be temporary due to the coronavirus lockdown and weak energy prices.

NAB economist, Kaixin Owyong noted their forecast for Q2 inflation is for a 1.9% decline in the headline CPI.  This would see an annual deflation of 0.4%.

Headline Aussie consumer prices were up by 0.3% in Q1 2020 compared to the previous quarter. This was pushing annual inflation to 2.2% from 1.8%, the highest inflation reading since Q3 2014.

This also buoyed the AUD in the FX market.  This was the first time since early 2018 inflation reached the Reserve Bank of Australia’s 2-3% inflation target.

GBP Slides against the AUD over UK-EU Talks 

The Pound edged lower against the Australian Dollar today after reports about UK-EU trade negotiations left the currency under pressure.

Reports revealed trade talks between Britain and the European Union were at a standstill.

According to officials and diplomats in Brussels, talks about post-Brexit trade agreements have no progress due to disagreements over COVID-19.

According to a diplomat, they are at an impasse. There are plenty of minor technical details where they could find solutions. On the fundamental goals each side is trying to achieve, there are enormous differences. Things cannot move without a political push, which is absent.

Looking ahead, the AUD is likely to edge higher against the GBP following the US Federal Reserve’s monetary policy meeting.

If the Fed announces further stimulus, it will boost risk appetite and buoy the risk-sensitive Aussie.

In forex news on Thursday morning, the Aussie could edge lower following the release of Australian ANZ business confidence data.

If business confidence slumps further than expected in April due to COVID-19, the GBP/AUD exchange rate will edge higher.

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