GBP AUD Opens the Week in a Well-Worn Range 

Australia has a drift in commodity prices from the recent surge. The GBP AUD exchange rate declined for two weeks against the Aussie dollar after another failure at the 1.7800 level. Traders struggle to separate the pair, with both having their headwinds. For the UK, it is inflation and the potential slowdown in growth. 

The GBP to AUD rate is trading at 1.7490 as the week begins with no economic data due on Monday. 

Rising corporate profits a significant factor in Aussie inflation

A new report from an economic think tank asserted that wages in Australia have little to do with the rise in inflation. 

The Australia Institute’s think tank report blamed rising corporate profits for the inflationary spike. Chief economist Dr Richard Denniss said the country wasn’t experiencing a wage-price spiral. It was at the start of a price-profit spiral.  

The country’s corporate sector needs to decrease spending. Australia’s national accounts indicate that the country’s rising profits, not rising costs, drive inflation. Although workers will make sacrifices to help curve inflation, it’s not wage growth that causes recent increases in the country’s inflation. According to the report, the ongoing effects of Covid coupled with soaring global energy prices from Russia’s invasion of Ukraine both contributed. 

The Ukraine issues could still add to inflation later in the year as the Russian gas crisis in Germany threatens to cause chaos in Germany and other nations. 

Treasurer Jim Chalmers echoed this perspective, stating that rages were not the reason behind inflation. Real wages continue to fall significantly. As a result, he did not share others’ concerns of a disastrous wage spiral. He called for wage growth from a more productive economy. This would be a win-win for employers and employees, increasing living standards.  

The comments mean that the RBA will be under pressure to find the balance between cooling inflation and not hurting the economy. 

UK leadership race enters the final stretch

The race for the UK leadership and the Prime Ministerial role heats up after televised debates this weekend.  

Rishi Sunak and Penny Mordaunt lead, with Liz Truss and Tom Tugendhat trailing them. The candidates clashed on taxes with differing views from the former Chancellor. 

The pound sterling versus the Australian dollar holds a pattern; it needs a catalyst to break higher or lower from the current range. That may require further developments in external countries, with Russia and China holding the cards. 

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