Beast from the East Curbs UK Retail Sales – Pound Australian Dollar (GBP/AUD) Exchange Rate Fluctuates

Update: Pound Australian Dollar (GBP/AUD) Exchange Rate Recovers, Supported by Wage Growth Overtaking Inflation

The Pound Australian Dollar (GBP/AUD) exchange rate recovered into the afternoon, finding ongoing support on the back of recent news that wage growth in the UK has finally overtaken inflation.

Whilst yesterday’s consumer price inflation print did bode poorly for the Bank of England’s (BoE) rate decision in May, the uptick in wages (taking place earlier in the week) record-low unemployment and the fact that inflation remains above target levels still makes a rate hike extremely likely in the eyes of the markets.

This effectively positions the BoE as the more hawkish option compared to the RBA and the Pound as the more attractive investment.

Severe Weather Keeps British Shoppers at Home and Pound Australian Dollar (GBP/AUD) Exchange Rate Falls

The Pound Australian Dollar (GBP/AUD) exchange rate fell on Thursday, hindered by a rather disappointing UK retail sales print and failing to capitalise on a poor performance in the Australian labour market.

According to the Office for National Statistics (ONS) retails sales in the UK fell from 1.5% to 1.1% in March (year-on-year), missing the market forecast of a rise to 1.9%.

This result was largely driven by the severe weather during this period, with the ‘Beast from the East’ keeping British consumers at home.

Lisa Hooker, Consumer Markets Leader at PwC, shared her thoughts on the readings, stating:

‘With snow and rain right through March including in the critical run up to Easter, it’s no surprise that shoppers avoided the high street. So, while online retailers benefited to some extent, last month’s retail sales were particularly disappointing.’

This result seemed to further indicate that the UK’s economy slowed in early 2018, and with retail sales accounting for 20% of the UK’s GDP, it did not bode too well for the Pound Australian Dollar’s near-term forecast.

Australian Labour Market Report Proves Mixed – Australian Dollar (AUD) Exchange Rates Unperturbed

The Pound Australian Dollar (GBP/AUD) exchange rate failed to capitalise on a mixed Australian labour market report today.

Australian job growth drastically slowed in March, according to the Australian Bureau of Statistics’ latest labour report.

Over the past 17 months employment in Australia has increased, making it the longest period of jobs growth since records began.

This changed with today’s report, however, with the bureau revising February’s reading from growth of 17.5k to a contraction of -6.4k, and March only recording a seasonally adjusted increase of 4,900 jobs – below the forecast of 20,000.

Nonetheless, Australia’s overall unemployment rate remained steady at 5.5%, and after such a long surge many analysts were unsurprised that a contraction in jobs growth has occurred.

Felicity Emmett, ANZ Bank Senior Economist shared her optimism despite the readings:

‘The slowdown in employment growth comes on the back of a very strong run through 2017 and with labour market leading indicators remaining positive there are still reasons to be optimistic about the outlook for employment and unemployment this year’.

This outlook seemed to help keep the Australian Dollar (AUD) afloat.

Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: Australian Inflation at the Forefront

The rest of this week is rather quiet for UK and Australian ecostats, but next week’s Australian consumer price inflation results (due on Tuesday) could knock the Pound Australian Dollar (GBP/AUD) exchange rate up or down.

This is because the future monetary policy trajectory of the RBA is largely dependent on an extended increase in the rate of inflation (into the bank’s target range).

If these readings prove upbeat then optimism could increase for a hawkish rate decision from the RBA, thus driving demand for the Australian Dollar (AUD) even higher.

Beyond consumer prices, however, there are still some concerns surrounding the performance of full-time employment and wage growth.

If wage growth remains stagnant then the RBA could choose to remain cautious, potentially giving room for the GBP/AUD exchange rate to swing back into the Pound’s favour.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

Contact John Cameron