GBP AUD Jumps with Higher Inflation Numbers

GBP AUD Unchanged Despite Weak UK GDP Figures

The GBP AUD exchange rate was almost 1% higher after the latest inflation reading from the UK. Analysts were expecting a reading of 6.7% but saw a 7% increase. The Bank of England may be pressured to act on rates if inflation keeps stretching beyond their 2% target. The day ahead has Australian employment figures for direction.

The GBP to AUD is trading at 1.7600 and has resistance ahead as it tries to recover recent losses.

UK inflation soars to 7% ahead of BoE interest rate meeting

The Bank of England will meet next week and will be pressured on interest rates as inflation continues to rise.

The latest inflation number came in above analysts’ expectations at 7% and that will pressure the central bank to recover wage damage.

The price pressures are already weighing on the property market. Mortgage applications to purchase a home rose 1% last week but were 6% lower than the same week one year ago. The BoE is expected to raise borrowing costs again at their next meeting, from 0.75% to 1%, as CPI continues to surge over their 2% target.

The Bank is also worried about ‘second-round’ effects – where rising inflation expectations force companies to lift profit margins, or workers to seek higher pay. But inflation is expected to rise above 8% in April, intensifying the squeeze on workers.

The government was also urged to act quickly and avoid interest rates on post-2012 student loans for graduates soaring to 12% in England and Wales, by the Institute for Fiscal Studies.

Australian figures will lead the exchange rate on Thursday

The pound sterling versus the Aussie dollar will have not have time to absorb the inflation numbers as Australian employment is released.

Economists are looking for an addition of 40k jobs which will be lower than last month’s 77k. Traders are also expecting a drop in unemployment to 3.9%. That would be a boost to the government as they face an uphill battle in the Federal election race.

The Prime Minister is also seeking to bolster domestic oil supplies after he announced A$250 million for Australian oil refineries.

The $125 million to both the Viva Energy refinery in Geelong, Victoria, and the Ampol refinery in Lytton, Queensland, will help with construction and facility upgrades.

Speaking outside the Geelong refinery, Mr Morrison said that elevated fuel prices stemming from the Russia-Ukraine conflict had forced the move.

“It’s 31 cents a litre less here in Geelong than it was before the budget as a result of our government,” he said.

“But we’ve got to do more than that because we know that not only is fuel such a basic thing that people need right across the country … but the economic plan we have to keep going forward has fuel security very much at its heart. That isn’t just about the economy, that’s about Australia’s sovereignty.”

The GBP v AUD will look to the latest employment figures for direction in the rest of the week but traders may boost the pound sterling as inflation continues to threaten wages.