- UK CPI 0.8% YoY in April, down from 1.5% yoy in March
- BoE expected to ease monetary policy further, maybe with negative interest rates
- Australian retail sales decline a record -17.9% in April
- At 09:15 UTC, GBP/AUD -0.2% at 1.8696 >> Real time exchange rates
After a brief stint in positive territory on Tuesday, the Pound is once again falling versus the Australian Dollar on Wednesday. The Pound Aussie Dollar exchange rate settled +0.27% in the previous session at 1.8744.
At 09:15 UTC, GBP/AUD is trading -0.2%, slipping through 1.8700 as the pair continues to fall away from the 4 year high of 2.0852 reached at the end of March.
The Pound is trading on the back foot after data revealed that the inflation rate sunk to its lowest level since 2016. Oil prices diving and clothes shops slashing prices as demand evaporated during lockdown dragged inflation southwards, bolstering the prospect of further action by the Bank of England.
According to the Office of National Statistics consumer price inflation (CPI) dropped to an annual rate of just 0.8% in April, down from 1.5% in March. This is significantly below the BoE’s 2% target.
The BoE increased its bond buying programme by £200 billion in March. BoE Governor Andrew Bailey has left the door wide open for additional bond purchases. The market broadly expects an additional £100 billion of bond purchases. The sharp drop in inflation also raises the prospect of the central bank taking interest rates into negative territory, potentially as soon as the next monetary policy meeting in June.
The Australian Dollar is managing to advance despite the mood in the market remaining fragile. Optimism surrounding Moderna’s vaccine has faded after a report on medical website STAT, claimed insufficient evidence was submitted to determine the vaccines’ efficacy. As a result, the recent risk rally has stalled.
Domestic data did little to support the march higher of the Aussie Dollar. Data overnight showed that Australian retail sales recorded the biggest ever decline in April after a record surge in March. Retail sales slumped -17.9% in April after a 8.5% jump the previous month.
The data showed deep declines across every industry. With unemployment expected to rise to 11.7% by mid year and remain above pre-coronavirus levels until next year, discretionary sales aren’t expected to rebound to pre-virus levels for some time either.
Investors will remain focused on the Australian economic calendar with PMI data due on Thursday morning local time.