Australian Dollar Strengthens After Strong Inflation Data as GBP Faulters on BoE Decision

Australian Dollar Strengthens After Strong Inflation Data as GBP Faulters on BoE Decision

The Australian Dollar strengthened yesterday after positive inflation data was released during the Asian session. The data showed that the nation’s consumer inflation beat expectations on year in the fourth quarter. The data release from the Australian Bureau of Statistics showed that inflation gained 1.8% on an annual basis. The data beat forecasts which were expecting 1.7%, which would have seen the reading remain unchanged from the previous quarter. Meanwhile, the GBP waits for today’s interest rate decision which is set to shape the path that the GBP takes in the coming months. Investors have remained cautious about the decision of the BoE, but this has caused the currency to drop over the past week.

The inflation figure showed 1.8% which was a 0.1% rise on expectations. Consumer prices also advanced 0.7% in the fourth quarter of 2019. This number beat projections for a gain of 0.6% and was up from the 0.5% from three months prior. The positivity was welcomed in Australia after the currency recently suffered losses from the rising fears of the coronavirus. The concerns over the spread of the virus have led to a risk-off mood in the market which has been detrimental to the risk-sensitive Australian Dollar. The fears are set to continue limiting the Australian Dollar as market risk appetite remains muted.

GBP awaits Bank of England interest rate decision at 12:00 GMT


Meanwhile, the UK is waiting for the announcement from the Bank of England regarding their interest rate decision. The UK economy looked to be on the rebound after recent economic releases, but with rate bets sitting at a 50-50 chance, it appears that the data was not enough to fend off the cut completely. Now investors are eagerly awaiting the decision to be unveiled today at 12:00 GMT. Both GBP and AUD investors alike will have a keen interest in the pathway that the GBP takes tomorrow. A cut could see a sharp drop in GBP exchange rates which will benefit the AUD, but if the BoE holds out and keeps the rate at 0.75% it might signal a rebound for the GBP. This decision will be the main catalyst for both currencies this week and rightly so attention will turn to the BoE.

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