Pound to Australian Dollar (GBP/AUD) Exchange Rate Benefits from Risk Rally Following Central Bank Developments
After climbing on Thursday morning in reaction to Britain’s latest retail sales results, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate shed most of its daily gains.
GBP/AUD continues to trend above the week’s opening levels, but the interbank rate has fallen back into the region of 1.76.
This was due to perceived dovishness from the European Central Bank (ECB), making risky high yielding currencies like the Australian Dollar (AUD) more appealing and pushing GBP/AUD down.
Pound Sterling to Australian Dollar Exchange Rate (GBP/AUD) Continues to Climb Following ECB Saying QE Will End
UPDATE 13:02 BST: Further signs that major central banks are heading towards normalised monetary policy, as well as Britain’s latest retail sales results, have left the Australian Dollar (AUD) looking unappealing throughout Thursday morning.
The Pound to Australian Dollar (GBP/AUD) exchange rate was trending near an interbank high of 1.77 at the time of writing.
Demand for risk-correlated currencies like the Australian Dollar was even weaker following news that the European Central Bank (ECB) planned to end its bond buying programme completely by the end of the year.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Climbs as UK Retail Results Beat Forecasts
A combination of weak Australian job stats and Britain’s surprisingly strong May retail sales results caused the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate to rise on Thursday.
Despite spending the first part of the week trending lower, GBP/AUD recovered to the week’s opening level of 1.7633 on Wednesday evening and spent most of Thursday climbing.
At the time of writing, GBP/AUD was trending near a high of 1.7766. This was the pair’s best level since late May.
Sterling (GBP) was bolstered by the latest UK retail sales stats, but GBP/AUD gains were made easier by Australia’s largely disappointing May jobs market results.
News that employment had been weaker than expected in May, as well as market jitters concerning US trade protectionism, left the risk-correlated Australian Dollar (AUD) less appealing.
Pound (GBP) Exchange Rates Climb as UK Retail Sales Jump
Following a weaker performance due to poor UK price pressure stats earlier in the week, the Pound (GBP) found firmer support on Thursday in the form of May’s retail sales results.
UK retail sales were forecast to have slowed notably month-on-month, from 1.6% to 0.5%. However, not only was the previous figure revised higher to 1.8%, the May figure came in at a strong 1.3%.
The yearly print was originally forecast to climb from 1.4% to 2.4%, but instead surged to an impressive 3.9%.
Furthermore, the retail sales figures excluding fuel also both beat forecasts. The data indicated that warm weather and the royal wedding event made consumers a lot happier to go out shopping.
Some analysts weren’t too optimistic though, suggesting that the rise in activity may prove to be a blip. According to Samuel Tombs from Pantheon:
‘Non-food sales likely will mean-revert in June, dragging overall volumes down. Food sales likely will weaken in June too, given that supermarkets attributed some of the 1.1 per cent month-to-month rise in sales volumes to the good weather, while motor fuel sales volumes also will struggle in response to the jump in pump prices,’
This sentiment has kept a lid on Sterling strength.
Australian Dollar (AUD) Exchange Rates Dip Following Mixed Australian Job Results
Thursday’s Asian session saw the publication of Australia’s May jobs market results – and the report wasn’t as optimistic as traders had hoped.
While Australia’s key unemployment rate did improve from 5.6% to 5.4% rather than the predicted 5.5%, this was largely due to an unexpected fall in the nation’s participation rate – which fell from 65.6% to 65.5%.
On top of the falling job market participation, only 12k new jobs were created rather than the predicted 18.8k, and the previous job change figure was revised lower from 22.6k to 18.4k.
Full-time employment slumped, while part-time jobs rose by over 32k.
As a result of the report, Australia’s economic outlook dampened slightly and the Australian Dollar (AUD) has weakened on Thursday.
Pound to Australian Dollar (GBP/AUD) Forecast: Central Bank Developments in Focus Next Week
Most of this week’s notable UK and Australian data has been published now, meaning that unless there are surprising political developments the Pound to Australian Dollar (GBP/AUD) exchange rate is likely to finish the week higher.
Next week’s economic calendar will be a little quieter, but with some notable central bank developments expected it could still be an influential week for GBP/AUD trade.
Tuesday’s Asian session will see the Reserve Bank of Australia (RBA) publish its latest meeting minutes. Any signs of a change in tone from the bank regarding Australia’s economy or global trade news could influence the Australian Dollar.
The RBA’s latest economic bulletin will be published on Thursday, as well as Westpac’s May leading index report. Of course, any fresh developments on global trade could influence the trade-correlated Australian Dollar (AUD) too.
GBP/AUD movement may be more influenced by Sterling (GBP) trade next week though, as the Bank of England’s (BoE) anticipated June policy decision will be held on Thursday.
While the bank is not expected to make any adjustments to UK monetary policy, investors will be looking out for the bank’s reactions to the latest UK data – such as the signs of weakness in UK wages and inflation.
If the bank takes a more cautious tone during its meeting next week, the Pound to Australian Dollar (GBP/AUD) exchange rate could fall.