Mounting Trade Tensions Fail to Boost Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate
UPDATE: As markets remain concerned by the more cautious nature of Bank of England (BoE) Governor Mark Carney’s comments the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate remained under pressure.
Although Chinese authorities announced plans for retaliatory tariffs of roughly $60 billion on US imports this failed to weigh down the Australian Dollar (AUD) on Friday afternoon.
Even with trade tensions between the US and China continuing to escalate investors continued to favour the higher-yielding Australian Dollar over the weakened Pound Sterling (GBP).
Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Extends Losses on Weak Services PMI
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate remained under pressure on Friday morning as July’s UK services PMI fell short of forecast.
Although markets had anticipated a slowdown in sector growth at the start of the third quarter there was disappointment as the index slumped from 55.1 to 53.5.
While this still signals a relatively solid state of growth within the UK service sector, sitting comfortably above the neutral baseline of 50, this weakening left Pound Sterling (GBP) on a downtrend.
As Bank of England (BoE) Governor Mark Carney offered fresh warnings over the risks of a no deal Brexit support for GBP exchange rates was generally lacking ahead of the weekend.
With the services PMI having highlighted Brexit-based uncertainty as a factor weighing on growth, confidence in the domestic outlook declined.
Bullish Australian Retail Sales Dent GBP/AUD Exchange Rate
A surprisingly strong uptick in second quarter Australian retail sales also dented the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate.
Investors were impressed to find that retail sales excluding inflation had surged 1.2% on the quarter, bettering forecasts for a 0.8% increase.
This suggests that confidence among Australian consumers has picked up, in spite of mounting global trade tensions.
Even so, the Australian Dollar (AUD) struggled to fully capitalise on this stronger showing thanks to a sharp slowdown in July’s services PMI.
As the PMI dipped from 63.0 to 53.6 this highlighted the fragile nature of the Australian economic outlook, especially if market tensions continue to rise.
US Jobs Data Forecast to Shore up Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate
US unemployment and wage data could offer the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate a rallying point this afternoon.
Continued tightening of the US labour market is likely to bolster the chances of the Federal Reserve raising interest rates at its September policy meeting, to the detriment of market risk appetite.
If the US Dollar (USD) finds a fresh boost this could weigh heavily on AUD exchange rates as investors are encouraged to sell out of the risk-sensitive Australian Dollar.
With the policy divergence between the Fed and the Reserve Bank of Australia (RBA) looking set to widen further over the months ahead the Australian Dollar may struggle to hold onto much traction.
Brexit Worries Continue to Hang Over GBP/AUD Exchange Rate
With UK data looking thin on the ground at the start of next week the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is unlikely to find any major rallying point.
Brexit-based jitters look set to keep Pound Sterling under some degree of pressure for the foreseeable future, unless negotiations show signs of positive progress.
As long as the UK and EU remain at odds over key issues the threat of a no deal Brexit is likely to drag on GBP exchange rates.
Until investors see evidence that talks are moving forward the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate looks set to remain on the back foot.