GBP/AUD Exchange Rate Softens as Inflationary Pressures
The Pound Australian Dollar (GBP/AUD) exchange rate is under pressure today as mixed UK employment data highlight the soaring cost-of-living crisis as wages continue to lag behind inflation.
At time of writing the GBP/AUD exchange rate is around $1.7736, falling by 0.63% from this morning’s opening rates.
Pound (GBP) Set to Rebound ahead of Inflation Figures?
The Pound (GBP) is fairly muted today as mixed employment data highlighted the cost-of-living crisis as real pay falls by a record 2.8% YoY in the three months to May. Despite unemployment remaining stable at 3.8%, and employment inactivity falling, soaring inflation is edging towards a recession.
However, the Pound could see a rebound as the positive aspect of the employment showed a robust labour market, lending support for a bolder Bank of England (BoE) rate hike at the next meeting. With the inflation rate set to hit a fresh 40 year high, the BoE could well raise rates by 50bps, potentially boosting Sterling.
Elsewhere, the final three have been announced in the Conservative leadership, leaving Rishi Sunak leading, closely followed by Liz Truss and Penny Mordaunt. With contrasting and potentially catastrophic tax plans, to the constant infighting within the Tory party, political uncertainty is highly likely to linger. The Pound will continue to be weighed down by the persistent volatility.
Australian Dollar (AUD) Strengthening on Hawkish RBA Minutes
The Australian Dollar (AUD) is strengthening today as hawkish minutes from the Reserve Bank of Australia (RBA) were released today. Across the board, policymakers agreed unanimously to further interest rate hikes to rein in inflation.
With expectations of either a 25 or 50 bps hike at the next meeting, the ‘Aussie’ could see further upside if the RBA continue their hawkish rhetoric as they seek to bring inflation down to their target levels of 2-3% by next year.
Despite concerning news out of China, the Australian Dollar hopes to maintain their forward momentum. With 699 fresh Covid cases reported on Monday in China, the highest daily number since May, lockdowns are looming once again. The city of Lanzhou look to enter a city-wide lockdown on Wednesday and Shanghai are increasing their mass testing.
The ‘Aussie’, a proxy currency to China, could come under pressure as their strict zero-Covid policy threatens to stall the economy once again.