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Pound Lower on Inflation Data, Aussie Weaker on RBA Official Comments

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The pound weakened against the dollar on Tuesday after the release of disappointing inflation data out of the United Kingdom. The Australian dollar fell further after comments from a Reserve Bank of Australia official weakened the currency.

Sterling dipped to 1.3298 during morning trade in Europe before settling at 1.3317. The Aussie was down 0.25% to 0.7547.

The pound’s losses were driven by a report from the U.K. Office for National Statistics, which showed that the consumer price index was at an annualized rate of 0.6% in August. Analysts were expecting a rate of 0.7%.

Compared to the previous month, consumer prices were up 0.3%. Economists predicted a 0.4% gain.

Core CPI, which excludes tobacco alcohol, food and energy, was up 1.3% in August, virtually unchanged from July’s reading of 1.4%.

Meanwhile, the Aussie was weakened by comments from an RBA official despite positive data out of China, Australian’s largest trading partner.

China reported that fixed asset investment was up 8.2% in August, which surpassed expectations of an 8% year-on-year gain. Industrial production was up 6.3%, beating expectations of a 6.1% rise year-on-year. Retail sales beat expectations, too, rising 10.6% compared to the 10.3% expected.

Christopher Kent, RBA assistant governor, said on Tuesday that the Aussie has not fallen as much as expected after cutting interest rates.

A report from the National Australia Bank showed that business confidence for August was at plus-6, higher than the previous survey, which came in at plus-4. Its business survey, however, declined from plus-8 to plus-7.

In the U.S., the dollar weakened against a basket of major currencies after a speech from Fed Reserve Governor Lael Brainard dampened expectations of a rate hike in the near future. The Fed is approaching its blackout period just ahead of its monetary policy meeting from September 20-21.

 

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