Update: GBP/AUD Advances Steps Back on Gloomy Retail Figures
The Pound to Australian Dollar (GBP/AUD) exchange rate was forced to relinquish its early gains this morning following the release of the UK’s latest retail report.
According to the CBI’s distributive trades survey, the UK’s retail sales balance plummeted from 8 to -8 in March, falling well below expectations and placing considerable pressure on the GBP exchange rate.
The fall in retail activity came amid a backdrop of weak household sentiment, which when combined with the cold snap at the start of the month, which saw consumers avoid the high street.
The report also suggested that retailer forecast any recovery in April to be largely muted, further weakening the appeal of the Pound.
GBP/AUD Exchange Rate Advances as US-China Trade Tensions Flare Again
The Pound to Australian Dollar (GBP/AUD) exchange rate is pushing higher this morning as fears of a US-led trade war reignited overnight.
At the time of writing GBP/AUD is up nearly 0.3% from its opening levels this morning, with the pairing striking its highest levels since Brexit.
Australian Dollar (AUD) Weakened by Trade Fears
The Australian Dollar is trending lower against the Pound and the majority of its other peers this morning as risk sentiment weakens on fears that trade tensions may flare again.
This follows reports that Trump’s administration is considering curtailing Chinese investment in the US by using emergency economic powers to limit investment in the US tech sector.
This comes just a day after markets appeared to settle following Trump’s initial round of tariffs on China, with analysts warning that the issue of trade is likely to hang over markets for some time to come.
Krishna Memani, chief investment officer at Oppenheimer Funds said:
‘The trade issue and uncertainty related to that is not going to fade in one day because all of a sudden we started thinking that we would reach some sort of a settlement with China. This is going to be somewhat of a long process for things to settle down.’
This suggests that the risk-prone Australian Dollar is likely to face further volatility in the months to come as trade uncertainty continues to rock markets.
Pound Sterling (GBP) Lifted by Positive Brexit Sentiment
Meanwhile the Pound is pushing higher this morning following reports that some positive progress is being made resolving a major hurdle in Brexit negotiations.
The uptick in sentiment has largely been derived from reports that the UK government will soon publish plans on how the UK will avoid a hard border with Ireland.
Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi said:
‘The pound has derived some additional support from a report that Irish officials have been told to expect new plans ‘imminently’ on how Britain plans to avoid a hard border with Northern Ireland. While short on details, the report has further boosted confidence that the UK and EU can find a workable and timely solution to the Irish border issue.’
The Irish border remains one the most contentious issues in Brexit talks, so reports that the UK and EU are making headway towards a solution will likely bolster hopes that the second stage of negotiations will proceed a little smoother than the first.
GBP/AUD Exchange Rate Forecast: Uptick in Retail Activity to Strengthen Sterling?
Looking ahead the GBP/AUD exchange rate may tick higher later this morning following the release of the Confederation of British Industry’s (CBI) latest distributive trades survey.
Economists forecast that today’s figures will show activity in the retail sector strengthened this month as the index rallies from 8 to 11.
Meanwhile the publication of Australia’s latest private sector credit figures may prove to have a very limited impact on the Australian Dollar in overnight trade, with analysts forecasting that credit growth remained subdued at 0.3% in February.