Australian Dollar to UK Pound Sterling (AUD/GBP) Exchange Rate has experienced a high amount of volatility this week with significant releases for both sides of the currency pairing.
The ‘Aussie’ has been slowly making gains on the Pound since the beginning of the calendar year from the 5 year lows seen in mid December where the AUD/GBP Exchange Rate hit a low of 0.5183.
The UK on Wednesday night during the offshore session released their monthly Consumer Price Index (CPI) result for the month of December. The Bank of England (BoE) has set their inflation target to 2% and use CPI as the leading indicator of this measurement. The forecast was for the inflation figure to fall from the previous monthly figure of 1% down to 0.7%. The actual result for December was a miss coming all the way down to 0.5%. A significantly bad result for the UK, which is the lowest figure seen in the UK since May 2000.
Chancellor George Osborne attempted to position this as a win for the general public, through his tweet ‘Inflation is 0.5% – lowest level in modern times. Welcome news with family budgets going further and economic recovery starting to be widely felt.’ However BoE Governor Mark Carney is still expected to provide a letter of explanation to the Chancellor on why the UK Inflation figure has fallen so significantly below target.
The importance of this figure for the AUD/GBP Exchange rate is clearly driven by the statement made by Mark Carney that ‘low inflation could mean lower interest rates for longer’. The rally of the Pound seen in late 2014 partially was attributed to speculation by investors to Interest Rate rises during the 2015 calendar year, this Inflation figure has certainly reduced the possibility of this occurring within the immediate future. Investors sold out of the Pound on the release of this figure and the AUD/GBP Exchange Rate made a rally to above 0.54.
The Australian Dollar wasn’t able to sustain its gain as during the local session on Wednesday Copper prices fell to a new five year low falling by 6%. Immediately falling the release of this the Australian Dollar lost a full per cent against the Pound Sterling falling to reach a low of 0.5319.
During the offshore session overnight the AUD/GBP Exchange rate was able to make some recovery and is currently trading at 0.5353 at 8:30 AM AEST Today.
AUD/GBP Exchange Rate Forecast
Locally Today Australia will release their unemployment figure at 10:30 AEST, the figure is expected to remain stable at 6.3%, the expectation is for an additional 5000 jobs to be added to the economy which appears to be a fairly conservative addition. Any variation from this figure is likely to cause further volatility to the AUD/GBP Exchange rate. A reduction for this figure could cause the AUD to rally further ahead however a higher unemployment figure could cause a significant sell-off in the Australian Dollar as it would represent a new record 12 year high in the unemployment rate which would be a concerning figure for the Australian Economy.