Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Climbs as Retail Sales Surge

UK Retail Sales Rebound Boosts Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate

A 1.2% increase in UK retail sales on the month helped to lift the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate out of its recent slump this morning.

Investors were encouraged by confirmation that consumer spending rebounded strongly after December’s underwhelming data, suggesting that sentiment is improving once again.

With consumers appearing to shrug off the increasing sense of Brexit-based uncertainty in favour of renewed spending the mood towards Pound Sterling (GBP) naturally improved.

While Theresa May saw a fresh defeat in Parliament over Brexit last night this was not enough to keep GBP exchange rates under pressure, given the vote’s non-binding nature.

Easing Chinese Inflation Fuels Market Risk Aversion and AUD Weakness

An unexpected decline in China’s consumer price index put pressure on the Australian Dollar (AUD), meanwhile.

As the headline Chinese inflation rate dipped from 1.9% to 1.7% this encouraged a general decline in market risk appetite, with the world’s second largest economy still showing signs of a slowdown.

While markets remain hopeful of progress towards a breakthrough in US-China trade negotiations this failed to prevent the Australian Dollar falling out of favour today.

If the two sides fail to show any tangible signs of progress towards an agreement in the days ahead, however, AUD exchange rates could extend their losses further.

Australian Dollar (AUD) Vulnerable Ahead of RBA Minutes

The release of the Reserve Bank of Australia’s (RBA) latest meeting minutes could put a fresh dampener on the Australian Dollar next week.

Given the more cautious nature of recent comments from RBA Governor Philip Lowe signs point towards a set of dovish minutes, leaving AUD exchange rates exposed to downside pressure.

If the central bank looks set to leave interest rates on hold for longer, or even raises the prospect of a rate cut, this could weigh heavily on the Australian Dollar.

Even though the Federal Reserve is expected to maintain a neutral policy bias in the near future the prospect of increased RBA dovishness could drag on the antipodean currency.

Solid Labour Market Data to Offer Pound Sterling (GBP) Encouragement

December’s UK labour market data may offer the Pound a boost on Tuesday if the unemployment rate improves.

If the labour market continues to tighten, even in the face of Brexit anxieties, this could give the GBP/AUD exchange rate a solid rallying point.

However, any easing in the latest average weekly earnings figures may dent the appeal of the Pound, with weaker wage growth likely to encourage greater Bank of England (BoE) caution.

Even so, developments surrounding Brexit still look set to remain the primary influence on GBP exchange rates for the foreseeable future.

Any perceived increase in the odds of a no-deal Brexit could see the GBP/AUD exchange rate return to a downtrend once again.

Louisa Heath

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