UK Retail Sales Contraction Prompts GBP/AUD Rate to Relinquish Early Gains
The Pound to Australian Dollar (GBP/AUD) exchange rate’s advance was cut short this morning as the latest UK retail sales data came in much worse than expected.
At the time of writing GBP/AUD remains close to today’s opening levels, as the disappointing retail sales weigh on the pairing.
Pound Muted vs Australian Dollar in Wake of Retail Data
The Pound was forced to relinquish its early gains against the Australian Dollar this morning as the UK’s latest retail sales figures came in well below expectations.
According to data released by the Office for National Statistics (ONS), UK retail sales nosedived from 1.1% to -1.5% in December, falling well below forecasts of a drop to -0.6% and hitting their lowest levels since June 2016.
The decline was mainly attributed to the increased prevalence of sales in November which has resulted a change in shopping habits as consumers bring their purchases forward.
However the growing pressure on consumer finances also appeared to be partly to blame according to analysts as families were forced to cut back last Christmas amid some belt tightening.
Rhian Murphy, ONS Senior Statistician, said:
‘Consumers continue to move Christmas purchases earlier, with higher spending in November and lower spending in December than seen in previous years. However, the longer-term picture is one of slowing growth, with increased prices squeezing people’s spending.’
While last month’s slump failed to prevent sales from growing in the fourth quarter, the overall reading for 2017 showed that sales grew at their slowest pace since 2013 last year at just 1.9%.
Australian Dollar Exchange Rates Strengthened by US Dollar Weakness
Meanwhile the continued weakness in the US Dollar (USD) is helping to bolster the appeal of the Australian Dollar this morning.
With concerns over a possible US government shutdown weighing on USD, investors are looking to ride out the uncertainty in other markets.
This, combined with a rise in iron ore prices on Thursday – its first rise in five days – helped the ‘Aussie’ strengthen against other majors, including the Pound.
However, analysts at Westpac Bank suggest AUD could be subject to some correction in the coming days, saying it appears to be overbought as it pushes over $0.80 against USD.
GBP/AUD Exchange Rate Forecast: UK Unemployment to Slide?
Looking ahead to next week, the GBP/AUD exchange rate may trend higher on Wednesday as the UK’s latest employment figures are forecast to show the jobless rate fell in November.
However the accompanying earning figures may prove to have the greater impact on Sterling concerns. With the financial pressures facing consumers, investors will be paying close attention to see whether wage growth edges closer to inflation.
Meanwhile, a lull in domestic data could leave the Australian Dollar rudderless next week, with any movement likely to be derived from external factors such as commodity prices and the strength of the US Dollar.