GBP/AUD plummets after RBA minutes, inflation data ahead

The pound’s strong start to the week didn’t last, with GBP exchange rates dipping from recent highs on Monday.

GBP/EUR slid from €1.1430 to €1.1343, GBP/USD bounced back from $1.3048 to $1.3102, GBP/AUD spiralled from AU$1.6763 to AU$1.6542, GBP/NZD spiked to NZ$1.7969 before falling back to N$1.7787 and GBP/CAD fluctuated between C$1.6587 and C$1.6502.

How could the UK inflation data impact the pound? Keep scrolling to find out…

What’s been happening?

With reports of significant divisions in the Conservative government casting a bit of a shadow on Brexit negotiations, the pound gave up much of Friday’s gains over the course of Monday’s European session.

The GBP/EUR exchange rate dropped from a three-week high despite data revealing a dip in Eurozone inflation levels in June.

Meanwhile, the pound fell from a 10-month high against the US dollar as the North American currency recovered from the pasting it received off the back of less-than-impressive US inflation stats.

During the Australasian session the pound recorded serious losses against the Australian dollar as minutes from the Reserve Bank of Australia’s (RBA) latest policy meeting indicated that the central bank might just be considering increasing interest rates.

As well as climbing against the pound, the Australian dollar shot to a two-year high against the US dollar.

The minutes discussed the level of an ‘appropriate neutral interest rate’ while also underlining the positive aspects of Australia’s economic outlook.

What's coming up?

Today’s UK inflation data will be the main cause of pound exchange rate movement.

As it stands, the consumer price index is expected to remain unchanged at 2.9% on the year in June, with the core consumer price index also holding at 2.6%.

If the results come in higher than forecast, however, Bank of England (BoE) interest rate hike expectations could rise amid bets that the level of pressure being exerted on UK consumers will force the central bank to take action in the near future.

Improved bets of higher borrowing costs in the UK would be Pound-supportive.

Conversely, a weaker-than-expected inflation reading could leave GBP exchange rates softer.

Other news to watch out for today includes the ZEW economic sentiment surveys for Germany and the Eurozone.

As you might expect, an improvement in confidence would lend the euro support while a decline could put the common currency under pressure.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.