GBP/AUD Exchange Rate Steady Following Australia’s CPI figure
The Pound to Australian Dollar (GBP/AUD) exchange rate is holding close to a one-week high this morning, in the wake of some gloomy inflation figures from Australia.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8068, virtually unchanged from this morning’s opening rate.
Australian Dollar (AUD) Pressured by Abysmal CPI Figures
The Australian Dollar (AUD) found itself on the back foot in early trade today, in the wake of Australia’s consumer price index.
According to data published by the Australian Bureau of Statistics (ABS), domestic inflation plummeted from 0.3% to –1.9% in the second quarter.
This startling collapse in inflation pressure placed Australia in its first state of deflation for 22 years, with the ABS reporting this was the largest quarter-on-quarter fall on record.
The dramatic plunge in inflation is of course attributed to the coronavirus crisis, but while Australia appears to be over the worst of its outbreak analysts warn the deflationary pressures are likely to persist for some time.
Justin Smirk, senior economist at Westpac, commented:
‘Despite many of the shocks being one offs that are set to be reversed, the COVID shutdown has shifted what we thought were signs of a recovery to a broader mixed outcome with signs of an underlying deflationary trend in many series again in the third quarter.’
The slump in inflation is also likely to ensure the Reserve Bank of Australia (RBA) maintains its accommodative monetary policy for the foreseeable future.
Pound’s (GBP) Gains Capped as UK Relations Sour
At the same time, the Pound (GBP) appears to be running out of momentum this morning as investors increasingly express their concerns over the UK’s souring relations with Europe, China and even the US.
While Brexit has stoked tensions between the UK and EU for some time now, Boris Johnson’s recent decision to re-impose a two-week quarantine on travelers returning from Spain has made matters worse.
On top of this, tensions with China continue to flare after the UK’s decision to exclude Huawei from its 5G rollout as well as Johnson’s visa offer to three-million Hong Kong residents both angered Beijing, at a time when the UK is seeking new trading partners.