Pound to Australian Dollar Exchange Rate Recovers Despite Poor UK Data and Solid Australian Job Stats
UPDATED: The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate hit its worst level in a month on Thursday morning, but rebounded from that low during the European session.
This was despite a disappointing UK retail sales report weighing on the Pound (GBP), and stronger-than-expected Australian employment change data boosting the Australian Dollar (AUD).
Investors found the risky Australian Dollar unappealing due to news that China seemed to be allowing the Chinese Yuan (CNY) to weaken, worsening market risk-sentiment.
Pound to Australian Dollar Exchange Rate Tries to Recover from UK Inflation Inspired Slip
UPDATED: Since the UK inflation report from June was published on Wednesday morning, the Pound to Australian Dollar (GBP/AUD) exchange rate has been trending near its worst levels in a month.
The primary cause of GBP/AUD weakness has been the UK inflation report and persistent Brexit jitters, but the pair’s losses were limited by Australian Dollar (AUD) weakness.
On top of this, some economists still argue the Bank of England (BoE) will hike rates in August rather than wait for things to get worse, which has limited Pound (GBP) losses.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Trending Near Worst Levels in a Month
Despite prevailing weakness in the Australian Dollar (AUD), the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate continued to tumble on Wednesday as investors digested the latest disappointing UK inflation figures.
As a result of Britain’s political and economic uncertainties, GBP/AUD may be on track to see its second consecutive week of losses despite AUD weakness.
GBP/AUD opened this week at the interbank level of 1.78 and at the time of writing was trending closer to the lows of 1.77. This was the lowest GBP/AUD level in a month.
While the latest weakness in the Pound (GBP) was due to disappointing UK inflation data dousing Bank of England (BoE) interest rate hike bets, the Pound was already under pressure thanks to general worries over Brexit.
Pound (GBP) Exchange Rates Knocked to Fresh Lows as UK Inflation Disappoints
Wednesday saw the publication of this week’s most influential UK ecostats, and every major print came in lower than economists had forecast.
Following perceived political tension and Brexit uncertainties earlier in the week, a fresh disappointing UK dataset was enough to make even more investors hesitant to buy the Pound (GBP).
June’s UK Consumer Price Index (CPI) inflation rate results were forecast to have seen modest improvements year-on-year.
However, the overall yearly figure remained at 2.4% rather than the forecast 2.6%, and the core inflation rate unexpectedly slowed from 2.1% to 1.9% year-on-year rather than climbing to the predicted 2.2%.
The month-on-month inflation rate slowed from 0.4% to 0.0% rather than the expected 0.2%.
Signs of weaker-than-expected UK price pressures caused some analysts to speculate that the Bank of England (BoE) would hold off on a UK interest rate hike in August. According to Tom Stevenson from Fidelity International:
‘Now it looks odds-on that the MPC will hold fire yet again. That’s particularly the case after yesterday’s wage growth data emerged weaker than expected at 2.5% including bonuses.’
Australian Dollar (AUD) Exchange Rates Benefit from Pound Weakness
Despite a lack of reasons for investors to buy the Australian Dollar (AUD) this week, investors have found the currency more appealing than the Brexit-battered Pound (GBP) and this has helped the currency to push GBP/AUD lower.
The primary reason for GBP/AUD losses has been Pound weakness, and its losses have been limited by factors weighing on the Australian Dollar’s appeal.
US protectionism remains a prevalent concern among investors of risky trade-correlated currencies like the Australian Dollar, as US President Donald Trump has shown no signs of moving away from his tough rhetoric.
On top of this, the Reserve Bank of Australia’s (RBA) latest meeting minutes showed the bank was concerned about the trade war as well as Australian household debt.
Wednesday’s Australian leading index data for June from Westpac improved from -0.2% to 0.0%, which may have helped support the Australian Dollar’s climb against Sterling.
Pound to Australian Dollar (GBP/AUD) Forecast: Australian Job Stats and UK Retail in Focus
Most of this week’s most influential UK data has been published already, but the Pound to Australian Dollar (GBP/AUD) exchange rate could still be influenced by Australian Dollar (AUD) movement on Thursday.
Australia’s June jobs market report will be published during Thursday’s Asian session. The key unemployment rate is forecast to have remained at 5.4% last month.
Any unexpected changes in the data could influence GBP/AUD movement for the remainder of the week.
Of course, Britain’s June retail sales results may prove similarly influential if they surprise investors.
UK retail sales are expected to have slowed in June, but if they come in much higher than expected it could hint at resilience among UK households and boost demand for the Pound to Australian Dollar (GBP/AUD) exchange rate.