Sterling Continues Decline against Australian Dollar (GBP/AUD) as UK Retail Sales Disappoint
This morning the Pound (GBP) is down around 0.4% against the Australian Dollar (AUD) following some weaker-than-expected retail sales figures from the Office for National Statistics (ONS).
According to the data, UK retail sales contracted -0.8% last month, down from an upwardly revised 0.4% growth rate in August.
The fall was sizeably larger than the 0.4% contraction pencilled in by economists, and appeared mostly to be driven by a sharp fall in food sales after a summer of barbecues and beer.
The ONS was quick to downplay any significance the figure might have, with Rhian Murphy, Head of Retail Sales saying:
‘Retail continued to grow in the three months to September with jewellery shops and online stores seeing particularly strong sales. This was despite a stark slowdown in food sales in September, following a bumper summer.’
Unexpected Dip in Australian Unemployment Leads to AUD/GBP Rally
The latest labour figures from Australia have revealed an unexpected dive in unemployment, taking the figure down to its lowest level in six years.
Figures released by the Australian Bureau of Statistics revealed that the monthly rate of unemployment sunk to 5% in September from a rate of 5.3% in August – beating expectations of there being no change.
The accompanying report showed that while there had been a modest improvement in employment, this had been amplified by a sharp drop in the size of the labour force as a whole.
Importantly for policymakers, the latest level of unemployment means that the rate now sits in the Reserve Bank of Australia’s (RBA) so-called NAIRU – or non-accelerating inflation rate of unemployment – zone.
NAIRU is simply the target area where it is expected wage inflation will build up, leading to a knock on effect in terms of growth in the economy.
However Analysts Remain Sceptical of Unemployment Data
While markets reacted positively to the upbeat unemployment figure, with the GBP/AUD rate immediately dipping 0.3%, not all were convinced, with JP Morgan analyst Tom Kennedy saying the improvement may be more to do with the new way statistics are calculated.
Other analysts seemed to agree, pointing out that a contracting pool of labour was nothing to celebrate.
Nevertheless, with the labour market clearly tightening, the chances of the Reserve Bank of Australia increasing interest rates still looks to be on hold until at least 2020, so AUD rates might not expect to see much long-term upside pressure from better labour statistics.
GBP/AUD Exchange Rate Outlook: UK Borrowing Data and Brexit in Focus
With no further important Australian data releases scheduled for the rest of this week, traders are likely to take direction from political considerations and the only noteworthy UK data release, in this case tomorrow’s public sector net borrowing.
Current expectations are that there will be a contraction in the amount the UK government borrowed in September, falling to £4.6bn from £5.9bn the month before.
Later in the same day, Bank of England Governor Mark Carney will be giving a speech, with traders likely to be focused on his words right at the very end of the European session.
Aside from these two things, attention is likely to be fixed on the UK-EU summit taking place in Brussels, with any indication that there a Brexit deal is forthcoming (or not) liable to send the GBP/AUD exchange rate sharply higher (or lower).