The Pound has been trending in a tight range against the Euro (GBP/EUR), US Dollar (GBP/USD) and Australian Dollar (GBP/AUD) on Tuesday after tumbling lower in recent sessions from the highest levels seen since the Brexit referendum.
Sterling dropped at the end of last week when Bank of England (BoE) Governor Mark Carney quashed hopes of an interest rate rise in May. Two members of the Monetary Policy Committee (MPC) voted for higher interest rates at the last meeting, and there’s still potential for a hike to take place should other members vote for one.
Australian Inflation Staves RBA Interest Rate Hike Hopes
Tuesday brought with it the Australian Consumer Price Index (CPI) which showed inflation remained below forecasts. The first quarter was expected to see a 0.5% uptick in consumer prices following the previous 0.6% reading, but only managed to come in at 0.4%. Meanwhile, the annual figures came in at 1.9% in the first quarter on the year, the same as the previous number, but economists had hoped it would reach 2.0%.
The data shows inflation remains below the Reserve Bank of Australia’s (RBA) 2-3.0% target and signals a likelihood that interest rates will remain on hold for longer. It’s hoped lower interest rates will spur labour market progress and increase hiring, which would ultimately result in better wages and higher inflation.
German Business Confidence Declines
The Eurozone hasn’t produced positive data to support the Euro either. The German IFO Business Climate number came in at 102.1 in April, a decline from the former 103.2. Economists had expected a smaller slip to 102.8. Additionally, the IFO Expectations survey tumbled to 98.7 in April, down from March’s 100.1. It was a hat-trick of disappointing data from the IFO as the German Current Assesment index also fell from 106.5 to 105.7.
The fall in German business sentiment led some economists to question whether the Eurozone’s largest economy was experiencing a slowdown.
Economist Carsten Brzeski commented:
‘Today’s disappointing reading will feed the discussion on whether Germany and the entire Eurozone is currency only in a soft patch or actually at the start of an unexpected downswing.’
US Consumer Confidence Picks Up
The US economy produced some good news on Tuesday when the April Consumer Confidence Index printed positively, coming in at 128.7 up from March’s 127.7 and despite forecasts to decline to 126.0. However, the news didn’t do enough to perk up the Buck.
The Pound to Australian Dollar (GBP/AUD) exchange rate sits at 1.8330. The Pound to US Dollar (GBP/USD) exchange rate is at levels of 1.3952. The Pound to Euro (GBP/EUR) exchange rate is residing at 1.1421.