Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Slides as UK Retailers Suffer Worst Christmas in a Decade

GBP/AUD Slips as Australian Dollar Buoyed by Weakening of the US Dollar

UPDATE: Thursday saw the release of disappointing British like-for-like retail sales for December, which showed a worse-than-anticipated fall from -0.5% to -0.7% compared to the previous year.

The data showed that retailers suffered their worst Christmas in over a decade, despite cutting prices, further suggesting that there is an economic slowdown ahead of the country’s departure from the European Union.

Weakness in the US Dollar that saw it fall to the lowest levels since October helped buoy the risk-sensitive Australian Dollar.

Signs that the US-China trade talks had made progress emerged, with the US Trade Delegation’s statement highlighting that China had agreed to purchase ‘a substantial amount of agricultural, energy, manufactured goods, and other products and services.’

The GBP/AUD exchange rate is currently trading at a rate of AU$1.7759 on the inter-bank market.

GBP/AUD Exchange Rate Rangebound despite Poor Australian Building Permit Figures

The Pound Australian Dollar (GBP/AUD) exchange rate is down slightly on the day and is currently trading at a rate of AU$1.77.

The release of the Australian Industry Group’s performance of services index for December showed that the Australian service sector has slowed, falling from 55.1 to 52.1, which did little to aid AUD.

Australian building permit figures for November have shown a somewhat cataclysmic fall from -13.4% to -32.8% over the course of a year, with building approvals plummeting to the lowest levels in over five years.

Justin Lokhorst, director of construction statistics at the Australian Bureau of Statistics stated: ‘The trend for total dwellings has been steadily declining over the past twelve months. The series is now 18.3% lower than at the same time last year.’

GBP/AUD Exchange Rate Slips as Brexit Negotiations Resume

Over the course of yesterday’s session, the Pound (GBP) slipped against the Australian Dollar (AUD) despite a stronger-than-expected Halifax UK house price index.

House sales grew in November, rising from 0.3% to 1.3% over the course of a year, although despite this growth Halifax has given caution to reading too much into the strength of these figures, and as they are low-impact they had little effect on the Pound exchange rates.

UK Parliament returned from its recess yesterday, as Brexit discussions continue, with the ‘meaningful vote’ date set for 15 January.

Ministers spoke out about a no-deal Brexit yesterday, with Business Secretary Greg Clark telling MPs a no-deal ‘should not be contemplated’ as concerns over safety arose, which likely did little to aid Sterling.

GBP/AUD Exchange Rate Slips on US-China Trade Talk Optimism

The Australian Dollar (AUD) strengthened against the Pound (GBP) over the course of the session yesterday, as global economic risk sentiment decreased, bolstering risk-sensitive currencies such as the ‘Aussie’.

Trade talks between the US and China generated positive sentiment, and the release of the news that the two had agreed upon a third, unscheduled, day of discussions in Beijing.

This likely gave the Australian Dollar a boost over the session on Wednesday, signaling both sides are serious about coming to an agreement, easing the trade tensions.

Ted McKinney, US Undersecretary for Trade and Foreign Agricultural Affairs commented on the talks, stating: ‘It’s been a good one for us.’

Outlook: GBP/AUD Exchange Rate to Fall on Back of Brexit Pessimism and Increased Risk-Buying?

With the trade talks between the US and China now complete, the details of these discussions are due to be released shortly, and if there are any major breakthroughs it seems likely that this will further weaken global risk sentiment.

If this occurs it is likely that the Australian Dollar (AUD) could make further advances on the Pound (GBP).

Brexit is due to remain in the spotlight as MPs continue their discussions regarding the EU Withdrawal Act, meaning the Pound will continue to be sensitive to headlines and press releases.

Later this afternoon will see a speech from the governor of the Bank of England, Mark Carney, which is likely to cause some movement for the Pound Australian Dollar (GBP/AUD) Exchange Rate, especially if his tone remains cautious in regard to Brexit.

Hannah Wilson

Contact Hannah Wilson