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Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Hold below 2.02 after UK Core Inflation Misses Estimates

Australian Dollar Currency Forecast

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trending within a limited range on Tuesday morning.

Although British inflation met with the market consensus and moved away from deflationary territory, the Pound softened versus most of its major peers. The depreciation can be attributed to the core inflation measure, which failed to match the median market forecast.

The Australian Dollar, meanwhile, softened versus some of its rivals after minutes from the most recent Reserve Bank of Australia (RBA) meeting showed policymakers were willing to intervene in the market in order to devalue the ‘Aussie’ (AUD).

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 2.0117.

Pound Sterling (GBP) Exchange Rate Forecast to Trend within Narrow Range against the ‘Aussie’ as Traders Digest Mixed Data

Having made reassurances that the dip into deflation was temporary, Bank of England (BoE) Governor Mark Carney will likely be pleased with May’s Consumer Price Index, which met with the median market forecast of a rise from -0.1% to 0.1% on the year. However, the Core CPI missed May’s market consensus of a rise from 0.8% to 1.0%, with the actual result only reaching 0.9%.

Whilst the inflation figures are generally positive, the Pound softened versus many of its peers in response. This is due to the fact that low inflation is a positive for consumers but not so much for investors.  Maike Currie, director at Fidelity Personal Investing, said: ‘Prices are low because of a fall in energy and food costs meanwhile wages are rising, albeit at a modest pace. The combination should boost consumer spending – the backbone of the UK economy. However low inflation means interest rates will stay lower for even longer. This means consumers’ gain is investors’ pain as a low growth, low return environment means savers and investors face an extended period of slim pickings.’

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate dropped to a low of 2.0050 today.

Australian Dollar (AUD) Exchange Rate Forecast to Hold Steady against the UK Asset after Dovish RBA

Minutes from the most recent RBA policy meeting showed that policymakers were willing to ease policy further in order to tackle ‘Aussie’ overvaluation. ‘A lower exchange rate would have an immediate beneficial effect on some sectors such as tourism,’ the Reserve Bank said in minutes of its June policy meeting in Sydney Tuesday. ‘It would need to be lower for a sustained period to have a significant effect on large investment decisions in other trade-exposed sectors.’

‘The board’s assessment was that the stance of monetary policy should be accommodative,’ the central bank said. ‘Output growth had continued at a below-trend pace over the past year and would remain a little below trend in the period ahead before picking up to around trend in the latter part of 2016.’

Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Trade Statically on Damp Market Sentiment

With the geopolitical situation in Europe hindering investor risk-appetite, and with an absence of further domestic data publications to provoke changes, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is unlikely to see significant volatility during Tuesday’s European session. Wednesday ought to see heightened GBP/AUD movement, however, with several British labour market data publications due for release.

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate climbed to a high of 2.0197 today.