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The Pound to Australian Dollar exchange rate has established a foothold above 1.80 thus far in December but would risk falling back 1.79 in the days ahead if Thursday's Bank of England (BoE) decision rocks the boat for Sterling or if the Aussie continues to outperform over the remainder of the week.
Australia's Dollar and others including Sterling benefited on Tuesday when the U.S. Dollar was sold across the board following a larger-than-expected decline in both main measures of U.S. inflation for November, though the strength of the antipodean currency's gains forced GBP/AUD onto the back foot.
That made for a second retreat and surprise on the downside of expectations for U.S. inflation, which is something that could have potentially significant implications for the Federal Reserve (Fed) policy stance as soon as Wednesday when the latest decision and forecasts are announced.
The data makes it less likely that a majority of Federal Open Market Committee members will see a need to raise interest rates beyond the 4.75% that September's forecasts suggested would likely mark their peak.
"Chair Powell’s tone likely will be less aggressively hawkish than in November, and his more dovish colleagues likely will be emboldened by this report. We now think 25bp is more likely on Feb 1, and we think that will be the final hike," says Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Above: GBP/AUD shown at hourly intervals alongside GBP/USD and AUD/USD. Click image for closer inspection.
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