The GBP AUD exchange rate was slightly higher on Wednesday after the latest inflation numbers from the Australian economy. The numbers came in 0.1% lower than analysts expected and will not trouble the current interest rate outlook.
The GBP to AUD rate traded at 1.7360. However, there is still the potential for further Aussie dollar gains after a weak bounce from the lows.
Australian inflation dips in July to ease economic fears
Australian inflation hit a 21-year high on Wednesday, with the annual rate hitting 6.1%.
The number came in 0.1% less than economists predicted, but the peak is likely further down the line. The data comes one day before Treasurer Jim Chalmers released the government’s budget forecasts.
Chalmers said that price rises would be “confronting” with inflation revised up significantly and growth revised down. The country will face “all of the implications” that it carries.
Energy prices are the key driver of Australian inflation gains. A recent report said that increased corporate profits stoked prices as there was no evidence of wages causing prices to rise. Transport costs were another problem due to energy with a 13.1% gain. House prices are 9% higher from a year earlier.
Economists now expect a further 0.50% rate increase to 1.35% at the August 2 policy meeting of the Federal Reserve. Deutsche Bank was more bullish than others on interest rates. It stepped back from the expectation for a 0.75% rate hike.
“We now look for a 50-basis point hike, but we also introduce another 50 basis point hike to follow in September,” economist Phil O’Donoghue said. Interest rates would hit 2.35 per cent in under five weeks.
Thursday brings the latest retail sales in another update for the Australian economy.
UK hit by another rail strike; Sunak talks fuel duty cut
Another rail strike halted the country’s network, with 40,000 walking off the job. The workers were upset about inflation’s effects on wages, and post-pandemic numbers are still low for commuters threatening jobs.
Rishi Sunak stood accused of a U-turn in the UK leadership race after proposing a fuel tax cut. During the campaign for the Conservative leadership, Mr Sunak criticised tax cuts, saying that the country needs to get inflation under control first.
He mentioned a VAT cut on energy when he was chancellor: “That policy would disproportionately benefit wealthier households.”
The IFS echoed that idea, saying the policy would be well directed at those who face the most substantial rises in their energy bills but not at the poorest who are at the biggest disadvantage when coping with increasing prices. They added that if the policy’s fiscal and environmental costs were temporary, they would be “bearable”. The most significant risk with the policy is that it would be politically challenging to restore VAT on energy bills.