Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Benefits from Retail Sales Miss

Australian Retail Sales Miss Limits Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Downside

As Australian retail sales missed forecasts in May this encouraged the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate to pick up from its multi-month lows this morning.

Although sales avoided another monthly contraction the modest uptick of 0.1% failed to offset the previous month’s decline.

All in all, this suggests that Australian consumers are taking a less optimistic view in the face of slowing global growth and US-China trade tensions, to the detriment of the Australian Dollar (AUD).

However, as Matthew Hassan, analyst at Westpac, noted:

‘Overall the May update is bleak but not bleaker than expected. Retail sales are treading water in nominal terms rather than contracting.’

Even so, as the Reserve Bank of Australia (RBA) appears willing to cut interest rates again in the months ahead if the data warrants it the mood towards the Australian Dollar proved rather bearish.

Ongoing UK Car Sales Contraction Drives Pound Sterling (GBP) Weakness

Pound Sterling (GBP) remained under pressure, meanwhile, thanks to another month of falling UK new car sales.

With Brexit-based uncertainty and political jitters continuing to deter consumers from making large purchases this weaker showing added to concerns that growth could slow in the second quarter.

Following on from this week’s disappointing raft of UK PMIs this latest sign of decline kept GBP exchange rates under pressure.

Further losses could be in store for the Pound tomorrow if June’s Halifax house price index shows a similar deterioration, given existing worries over the economic outlook,

Unless the UK housing market demonstrates greater signs of resilience the GBP/AUD exchange rate could return to a downtrend.

Improved Australian Construction PMI Forecast to Boost AUD Exchange Rates

AUD exchange rates could find a rallying point overnight if June’s Australian construction PMI picks up on the month as forecast.

Evidence of an improvement within the construction sector could bolster confidence in the general economic outlook, even as worries over global growth persist.

However, as the sector looks set to remain in a state of contraction, barring a significant upside surprise, any positive impact on the Australian Dollar may prove limited.

If construction slides further into a state of decline, on the other hand, AUD exchange rates look vulnerable to a fresh sell-off.

GBP/AUD Exchange Rate Remains Vulnerable to Political Anxiety

Speculation over the Conservative leadership contest may continue to weigh on the GBP/AUD exchange rate in the coming week.

As long as both Jeremy Hunt and Boris Johnson refuse to rule out the prospect of the UK crashing out of the EU without a deal in October support for the Pound is likely to remain muted.

The GBP/AUD exchange rate could slip back towards its recent lows if May’s gross domestic product report shows any signs of a slowdown, meanwhile.

A fresh indication that the economy is slowing in response to a prolonged period of uncertainty over Brexit may drag Pound Sterling down across the board next week.

Louisa Heath

Contact Louisa Heath