GBP/AUD Exchange Rate Softens on Disappointing Retail Sales Figures
The Pound to Australian Dollar (GBP/AUD) exchange rate is trending lower this morning, in response to the UK’s weaker-than-expected retail sales figures.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8902, down roughly 0.3% from today’s opening rate.
Pound (GBP) Buffeted By Surprise Contraction in Retail Sales
The Pound (GBP) is ticking lower against the Australian Dollar (AUD) and most of its other peers this morning as markets react to the UK’s latest retail sales figures.
According to data published by the Office for National Statistics (ONS), sales growth contracted 0.6% last month, a slight improvement on the 0.8% slump recorded in November but well below forecasts of a 0.5% expansion in sales.
Analysts had widely expected a pick-up in sales in December due to the late timing of Black Friday last year resulting in the sales event falling in last month’s trading period.
The disappointing result lead to sales growth slumping 1% in three months to December.
Retail sales decreased by 1.0% in the three months to December 2019 https://t.co/lsW7985C51 pic.twitter.com/Mjc76cvEPf
— Office for National Statistics (ONS) (@ONS) January 17, 2020
Ryan Broomfield, partner at business services firm RSM, comments:
‘This is a particularly poor result given this is meant to be the Golden Quarter where seasonal sales are supposed to provide a revenue boost. In addition, these figures will not show the potential sting in the tail – the impact of consumers returning unwanted gifts after Christmas.’
Today’s data also cast a worrying shadow over 2020, with GBP investors fearing this downtrend could persist in the coming year.
Australian Dollar (AUD)
At the same time, the Australian Dollar’s (AUD) gains have been capped this morning by growing doubts regarding the recently signed ‘phase one’ trade deal between the US and China.
While investors have welcomed the signing of the deal as helping to diffuse tensions between the two powers, many analysts remain sceptical, warning that these tensions could flare again in ‘phase two’ as negotiations move to more sensitive subjects.
Michael Taylor, managing director of Moody’s Investors Service Credit Strategy, suggests:
‘The agreement could help boost bilateral exports by the two economies and lead to an improvement in business confidence as well as investment.
‘But the details of the agreement suggest that there remains considerable scope for friction between the two sides.’
GBP/AUD Forecast: Weak UK Wage Growth to Drag on Sterling?
Looking ahead to next week, the Pound to Australian Dollar (GBP/AUD) exchange rate could face some pressure in the first half of the session, with the publication of the UK’s latest employment report.
Economists forecast that while the unemployment rate will have remained unchanged, it will show that wage growth continued to slow in November.
This may weigh heavily on Sterling sentiment next week as it is likely to increase the pressure on the Bank of England (BoE) to pursue an interest rate cut this month.
Meanwhile, the Australian Dollar may find itself in a similar boat next week, with the publication of Australia’s own jobs report.
Analysts expect December’s figures to report a slowdown in employment growth, stoking expectations the Reserve Bank of Australia (RBA) could response with a rate cut of its own.