GBP/AUD Exchange Rate Flat on Australia Retail Sales Figures
The Pound to Australian Dollar (GBP/AUD) exchange rate is rangebound this morning as markets respond to Australia’s latest retail sales figures.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8138, virtually unchanged from this morning’s opening rate.
Australian Dollar (AUD) Dented by Record Slump in Retail Sales
The Australian Dollar (AUD) is struggling to find support this morning after data published overnight showed Australia suffered a record collapse in retail sales in April.
Data from the Australian Bureau of Statistics (ABS) reported that sales growth contracted by a whopping 17.7% in April, down from a record high of 8.5%.
This dramatic swing in sales came as panic buying faded and non-essential stores closed as part of Australia’s coronavirus lockdown.
This has fueled fears that Australia’s economy could contract as much as 8% in the second quarter of 2020, given April’s retail sales collapse alone is thought to have cost 2.1% of GDP.
With yesterday’s GDP figures confirming that Australia’s economy shrank 0.3% in the first quarter, this leaves the country on the path to its sharpest contraction in nearly 30 years.
Pound (GBP) Muted as Construction Sector Continues to Shrink
Meanwhile, the Pound (GBP) is flat this morning following the release of the UK’s latest construction PMI.
According to data published by IHS Markit, the contraction of the UK construction sector eased last month, with the index rising from a starling 8.2 to28.9 but falling short of expectations for a rise to 29.7.
While the easing of lockdown measures saw an improvement in activity in May, the construction sectors remained firmly in contraction territory, something which may persist for some times as social distancing measures put constraints on work sites.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said:
‘As the sector staggers back to work, and builders put their heads above the parapet, they face a number of obstacles. New safer working practices will ensure operations can continue but client confidence to place new orders is harder to predict.’
GBP/AUD Exchange Rate Forecast: Brexit Angst to Weigh on Sterling Sentiment?
Looking ahead, the Pound to Australian Dollar (GBP/AUD) exchange rate is likely to face pressure through the remainder of this session as Brexit clouds hang over Sterling.
While the latest round of trade talks between the UK and EU are still ongoing suggestions from EU officials that there has been ‘no real progress’ in negotiations aren’t filling GBP investors with hope, with the risk of a no-deal Brexit appearing to grow by the day.
James Smith an economist at ING, comments:
‘Brexit is back in the spotlight. There’s little to suggest we should expect any real progress, and that’s one reason why we’ve seen some risk premium creep back into the Pound.’
Meanwhile, the outlook for the Australian Dollar looks equally bleak, amidst renewed tensions between the US and China after both countries began suspending flights between one another.