GBP AUD at Three-month Lows on Aussie Recovery Hopes

GBP AUD Consolidates with UK Employment Due

The GBP AUD exchange rate was trading at three-month lows near the 1.18300 level as traders pin their hopes on a recovery in the Aussie economy. The reopening of Melbourne adds to the lifting of restrictions in NSW and puts an end to the harsh lockdowns and failed ‘zero covid’ policies that wrecked the country’s economic rebound. The latest inflation rate today was expected to come in at 3.1%.

The AUD GBP exchange rate is trading at 1.18355 and Rishi Sunak will also deliver his Autumn UK budget today.

Australian economy awaits inflation report

The latest inflation report was due out for the Australian economy today in what has been a key topic in financial markets lately.

Australians are already seeing higher petrol prices and reports are growing about disruptions to trade caused by the government lockdowns. Carmakers have been struggling to secure chips, while restaurant owners say the cost of food imports is soaring.

Australia’s consumer price index for the September quarter will provide a clearer picture of the price rises in Australia. New Zealand have already moved on rates and the Bank of England are set to follow.

According to Katrina Ell, senior economist with Moody’s Analytics, Wednesday’s number is “an incredibly important inflation print”.

New Zealand posted their fastest rise in inflation on quarterly basis, since 1987. Australia and New Zealand share many market similarities, not least looming construction bottlenecks and a reliance on imports for many finished goods, Ell says.

Australia’s September CPI is unlikely to be close to the Kiwis’ 4.9% annualised reading, but the current figure will be masked by the lockdowns. However, Ell predicts Australia’s CPI will be 2.4% – compared with a market consensus closer to 3%.

“That’s really significant because, obviously, Victoria and New South Wales were in extended lockdowns through part or all of the September quarter,” Ell says. “So we would have expected to see a slowdown” in inflation if not for those global disruptions.

“We’re seeing severe global supply chain disruptions and that’s causing prices to increase, not just in Australia but also, you know, across the globe,” Ell says.

Rishi Sunak to deliver budget as government warned on further restrictions

The UK government has been warned that a move to implement a plan B of covid measures in the country would mean an £18 billion hit. Labour and the Liberal Democrats were both calling for an immediate implementation but have been left red-faced by the latest figures which are predicting a drop in UK cases into Christmas.

Meanwhile, Chancellor Rishi Sunak will deliver his latest Autumn budget today as the government seeks to boost the economy after a recent flatlining of the recovery.

A rise in the minimum wage and a halt to public sector pay freezes will be one of the headlines, but inflation is eating into any gains on that front. Bank tax cuts are a possibility to boost the competitiveness of the sector.

The GBP v AUD will move on the Aussie inflation figure and then look to Sunak’s speech for a further catalyst.

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