The Pound Australian Dollar exchange rate rose today following yesterday’s release of the latest Australian inflation gauge. The nation’s inflation figure rose less than expected, dampening confidence in Australia’s economic recovery. The pairing is currently trading around AU$1.79.
Sarah Hunter, chief economist for BIS Oxford Economics, commented:
‘Core inflation is likely to remain weak for some time. Wages growth remains subdued and demand for many services is still recovering to pre-pandemic levels, which will limit any immediate pressures on prices.’
Tensions between Australia and China are, however, weighing on demand for the ‘Aussie’ today.
China is Australia’s largest trading partner, so any conflict between the two nations tends to be AUD-negative.
Australian Prime Minister Scott Morrison’s defence policy has stirred up concerns in Beijing, sparking off tensions between Australia and China, the world’s second-largest economy.
Natasha Kassam, the director of the Lowy Institute’s public opinion and foreign policy program, commented:
‘I think while there are good reasons to increase our defence spending and to raise public awareness of the challenges that loom in our region, there are also real risks that come from causing panic and hysteria.’
The Pound (GBP) rose today as the outlook for the UK economy remains generally positive.
Today saw news that the bank NatWest had recorded a jump in profits thanks to the UK’s recovering economy.
NatWest’s chief executive Alison Rose said:
‘Defaults remain low as a result of the UK Government support schemes and there are reasons for optimism with the vaccine programmes progressing at pace and restrictions being eased’.
British workers are also beginning to move off furlough as the nation’s economy reopens.
As a result, rising confidence in the British economy has proved GBP-positive.
In the absence of any UK economic data today, however, the Pound has remained largely rudderless.
Looking ahead, the Pound Australian Dollar (GBP/AUD) exchange rate could head higher if the outlook for the nation’s economy continue to improve.