GBP AUD Heads for April Lows After UK Data

GBP AUD Heads for April Lows After UK Data

The GBP AUD exchange rate slumped over the last three weeks as the pound rally was extinguished. This week’s inflation and wages figures have the pound sterling on the back foot again, as the pair heads for April lows. That is despite a potential 50bps rate hike coming from the BoE. Meanwhile, Australia is on alert for a possible outbreak of foot and mouth disease, which appeared in Melbourne. 

The GBP to AUD rate trades at 1.7379, with the 1.7200 lows from April in focus. 

The pound sterling weakened by recession fears after inflation

The pound sterling weakened on economic data, with real wages falling and inflation ticking higher this week. 

The Bank of England Governor Andrew Bailey confirmed this week that a 50-basis point interest rate hike is one option to be discussed at the next BoE policy meeting. Policymakers face a problem with higher inflation eating into wages, but fast rate hikes threaten economic growth in the UK. 

In their 6–12-month forex forecasts released this week, ING analysts discussed the pound sterling. 

“With UK CPI expected to push up to 11% in October, expect the BoE to stay hawkish and to hike 50bp on August 4th,” analysts said. 

The group also said that the pound sterling is a growth-sensitive currency and could come under pressure this summer. UK house prices were higher this week at 12.8% annually, but industry insiders expect that to slow down as fixed rate mortgage lockups expire. 

Australian economy faces foot and mouth headwind

Australia moved to prevent the spread of a foot and mouth outbreak in Indonesia. There were calls to close the border to the country, where Bali is a popular destination for Aussie tourists. 

A severe outbreak could cost the economy up to $80billion and lead to shortages of a particular food and drink items. The latest concerns come after traces of the disease and African swine fever was detected in pork products at a Melbourne retailer. The Cattle Council of Australia (CCA) asked travellers to reconsider travelling to Bali, taking into account the impact on the economy.  

“Red meat products would disappear faster than during the COVID-19 lockdowns,” said CCA CEO John McGoverne, adding that dairy products would follow soon after with steak, flat whites and ice cream potentially being taken off the menu until the country starts to recover.  

Australia also faces problems with backlogs in its visa processing system. On Wednesday, the home affairs minister said that 60,000 permanent visa applications from overseas workers would go to the top of the pile at the expense of temporary ones. 

It celebrated the reopening of its borders, but visa delays will eat into the potential benefits.  

“Businesses, the international education sector, as well as families right across Australia despair at the black hole of the visa and citizenship processing system,” Julian Hill, Labor MP, said. 

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