Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Slides in Anticipation of G20 Breakthrough

Hopes for G20 Trade Progress Weigh on Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate

As markets braced for the upcoming G20 summit the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate slumped, weakening on hopes of potential progress in trade talks between the US and China.

Any easing in global trade tensions would help the Australian Dollar (AUD) extend its latest rally further, given its exposure to the Chinese economy and correlation with base metal prices.

However, if the G20 talks fail to yield any signs of a thawing in US-China relations this could see the antipodean currency fall sharply out of favour once again.

Further signs of a slowdown in Chinese economic momentum, meanwhile, could weigh heavily on AUD exchange rates in the near term.

Underwhelming Retail Sales and Mortgage Approvals Drag on Pound Sterling (GBP)

After the disappointing nature of yesterday’s CBI reported retail sales index Pound Sterling (GBP) has remained on a weaker footing.

May’s BBA mortgage approvals data did nothing to improve the appeal of the Pound this morning, showing a decline on the month as Brexit-based uncertainty continued to weigh on domestic sentiment.

With households showing greater signs of caution evidence continues to point towards a weaker showing for the second quarter UK gross domestic product, leaving GBP exchange rates exposed to selling pressure.

As the Bank of England (BoE) has already shifted towards a more dovish policy outlook this latest underwhelming data further diminished the odds of interest rates rising in the foreseeable future.

GBP/AUD Exchange Rate Vulnerable to Weakening UK Consumer Confidence

Friday’s GfK consumer confidence index may put further pressure on the Pound, with forecasts suggesting a decline from -10 to -11.

If consumer sentiment shows fresh signs of souring the GBP/AUD exchange rate looks set to shed further ground ahead of the weekend.

With a lack of confidence likely to translate into lower levels of consumer spending a weaker showing here may add to worries over the outlook of the economy in the second quarter.

The finalised first quarter GDP could also weigh on GBP exchange rates if there are any negative revisions to the growth data.

Limited Private Sector Credit Growth Forecast to Stall Australian Dollar (AUD)

No change is forecast for May’s Australian private sector credit figures, meanwhile, limiting the potential for further Australian Dollar gains.

With credit growth set to hold steady at 0.2% on the month this is unlikely to alter the current policy outlook of the Reserve Bank of Australia (RBA) and the high odds of further monetary loosening to come.

Unless the data shows a solid improvement, indicating greater domestic confidence, AUD exchange rates could struggle to return to a positive footing.

If tensions between the US and Iran continue to mount this could equally dent the Australian Dollar, giving the GBP/AUD exchange rate a fresh boost.

Louisa Heath

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