Pound Australian Dollar (GBP/AUD) Exchange Rate Stalls as UK Retail Sales Deliver First Annual Decline

Surprise Yearly Decline in UK Retail Sales Weakens Pound Australian Dollar (GBP/AUD) Exchange Rate

A fresh decline in the British Retail Consortium like-for-like sales data kept the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate under pressure this morning.

As well as a weak December performance the data also revealed that total sales had declined -0.1% over the course of 2019, pointing towards a subdued level of consumer confidence.

Commenting on the results, Helen Dickinson, chief executive of the BRC, noted:

‘2019 was the worst year on record and the first year to show an overall decline in retail sales.’

All in all, this did not paint an encouraging picture of the retail outlook heading into 2020, raising the risk of an underwhelming performance from the UK economy as a whole.

Given that stronger levels of consumer sentiment and spending have helped to shore up growth since 2016 this sustained weakness could weigh heavily on the outlook of Pound Sterling (GBP).

Australian Dollar Supported by Widened Trade Surplus

The appeal of the Australian Dollar (AUD), meanwhile, saw some improvement thanks to a surprise widening of the Australian trade surplus.

Rather than narrowing as forecast the surplus instead swelled from 4.07 billion to 5.8 billion in November, suggesting that global trade tensions failed to drag on the Australian economy.

However, while export volumes jumped 2% on the month in November the positive impact of the improvement ultimately proved limited.

As the Chinese inflation rate failed to pick up as forecast in December this limited market risk appetite as concerns over the health of the world’s second-largest economy lingered.

GBP Exchange Rates Vulnerable to Comments from BoE Governor

Comments from outgoing Bank of England (BoE) Governor Mark Carney could provoke fresh volatility for the GBP/AUD exchange rate this afternoon, meanwhile.

If Carney expresses a greater sense of caution over the health of the UK’s economic outlook the Pound may come under renewed selling pressure.

As long as markets see a risk that the BoE could cut interest rates in the course of 2020 the potential for GBP exchange rate gains looks set to diminish.

On the other hand, signs that Carney remains optimistic over the potential for a recovery in UK growth may help the GBP/AUD exchange rate to return to a stronger footing.

Fresh Retail Sales Growth Forecast to Shore up Australian Dollar

The Australian Dollar may gain a fresh boost on the back of November’s retail sales data on Friday, with forecasts pointing towards 0.4% growth.

Evidence that consumer spending picked back up during the fourth quarter could encourage hopes of stronger overall growth, especially in the wake of the positive trade data.

If investors see reason to bet that the Australian economy will deliver solid growth for the final quarter of 2019 this could limit the potential for Australian Dollar losses.

Another underwhelming month for sales growth, though, could see AUD exchange rates dragged lower heading into the weekend.

Louisa Heath

Contact Louisa Heath