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AUD/GBP Exchange Rate Holds Steady Ahead of US CPI Figures

Pound Sterling Exchange Rates

Caution Ahead of US Inflation Data Leaves AUD/GBP Muted

The Australian Dollar Pound (AUD/GBP) exchange rate held steady on Wednesday as the pairing went into holding pattern ahead of the release of the latest US inflation figures.

At the time of writing AUD/GBP is currently trading close to its opening levels, although the ‘Aussie’ is making some headway towards striking higher.

Australian Dollar (AUD) Subdued as Markets Await US CPI Data

The Australian Dollar struggled to find any momentum on Wednesday as markets remained cautious in advance of a key inflation reading in the US.

The latest US Consumer Price Index (CPI) is forecast to show that inflation tumbled from 2.1% to 1.9% in January, possibility prompting volatility in currency markets.

This is because inflation remains a key measure on whether the Federal Reserve is likely to be confident in tightening monetary policy.

A drop in inflation is likely to dent the chances of Fed policymakers voting in a rate hike next month as many analysts predict, possibly leading to a drop in the US Dollar (USD) and causing ripples across the currency market.

Pound (GBP) Pressured by IMF Assessment

Meanwhile the Pound suffered at the start of the European session on Wednesday as the International Monetary Fund (IMF) published its latest assessment of the UK economy.

In its report, the Fund reflected on the narrowing of economic growth in 2017 following the squeeze on household finances and the decline in business investment.

This lead the IMF to forecast that UK growth is likely to hold at 1.5% for the time being, although warns that this assessment is based on the UK government securing a free trade deal and a transitional agreement in Brexit.

The IMF said in its report;

‘In the medium term, growth is projected to remain at around 1.5% although the baseline outlook is subject to a number of risks, including developments with Brexit negotiations.’

AUD/GBP Forecast: Australian Employment Growth to Slow?

Looking ahead movement in the AUD/GBP exchange rate tomorrow is likely to be driven by the outcome of Australia’s latest labour report.

Economists forecast that the report will reveal that unemployment held at 5.5% in January as employment growth slowed at the start of the year, possibility weakening the appeal of the Australian Dollar.

Meanwhile the Pound may strike higher in the second half of this week’s session as the UK’s latest retail sales figures are expected to show that sales growth rebounded sharply from -1.5% to 1.5% last month.