The Pound surged against the Australian Dollar and other major peers on Tuesday after data showed that inflation in the UK increased more-than-forecast in April.
According to the UK’s Office for National Statistics, the UK’s inflation rate as measured by the Consumer Price Index, increased by 1.8% in April from the 1.6% figure recorded in March and was the first rise in inflation seen in ten months.
The rise brings the inflation rate closer to the Bank of England’s target of 2% and as such the Pound received a boost from investor bets that the BoE will increase interest rates sooner than initially forecast.
On a month-by-month basis consumer prices increased by 0.4% in April, up from the 0.2% figure seen in March.
The Australian Dollar meanwhile went into decline following a string of negative news for the currency.
The Pound to Australian Dollar exchange rate (GBP/AUD) is currently trading around 1.826.
The Reserve Bank of Australia’s policy meeting minutes for May showed that policy makers want to leave interest rates at record low levels for an extended period as the nation’s labour market continues to see spare capacity.
“The board noted that overall growth in coming quarters was likely to be below the trend given expected due to slower growth in exports, the decline in mining investment and the planned fiscal consolidation. The current accommodative stance of policy was likely to be appropriate for some time yet,” said the minutes from the RBA’s May 6th policy meeting.
Also weighing upon the currency were concerns that Australia could lose its much prized AAA credit rating after Standard and Poor’s said that unless the government takes action to further reduce the nations deficits a ratings cut could occur.
Geopolitical worries are also impacting upon demand for the ‘Aussie’.
Worries over tensions between China and Vietnam, Ukraine, Libya and Thailand have all reduced demand for riskier assets.
GBP to AUD update – 21/05/14
The Pound has continued its upward movement against the Australian Dollar after weaker than forecast domestic data combined with falling iron ore prices to weigh upon the ‘Aussie’ currency.
According to the Westpac Banking Corporation, consumer sentiment in Australia tumbled by 6.8% this month as concerns over the recent budget, a slowing Chinese economy and concerns over falling iron ore prices weighed.
A separate report meanwhile showed that wage growth in the country edged higher by 0.7% in the last quarter of 2013, in line with expectations.
Sterling is likely to make further gains against the Australian Dollar due to the release of UK retail sales data which is forecast to come in strongly.
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