Pound Australian Dollar (GBP/AUD) Exchange Rate Loses Upside Momentum as Aussie Retail Sales Strengthen

Rising Australian Retail Sales Weigh on Pound Australian Dollar (GBP/AUD) Exchange Rate

A solid monthly uptick in Australian retail sales saw the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate maintaining a weaker footing.

In spite of the country’s official slide into a state of technical recession, investors greeted the 3.2% monthly increase in sales, boosting the Australian Dollar (AUD).

While the wider Australian economy looks set to remain under pressure in the coming months this positive showing still offered hope that consumer demand may hold up.

Growing anticipation ahead of the release of the latest US non-farm payrolls report also helped to shore up AUD exchange rates as the strength of the US Dollar (USD) faltered.

Drop in New Car Sales Dampens Pound Sterling Appeal

News that UK new car sales had fallen back -5.8% on the year in August limited the appeal of Pound Sterling (GBP), meanwhile.

As the initial surge in post-lockdown demand faded the car market failed to hold onto any particular degree of strength, reflecting the slowdown in the wider economy.

Although August is traditionally the weakest month of the year for new car sales, ahead of the release of fresh number plates in September, this still dented market sentiment.

August’s UK construction PMI also put a dampener on the GBP/AUD exchange rate, showing a smaller degree of expansion on the month than forecast.

However, as the construction sector only accounts for a limited proportion of the UK gross domestic product the ultimate impact of the softer PMI was tempered.

Underwhelming Chinese Trade Figures May Knock Australian Dollar

Support for the Australian Dollar could easily fade next week, though, if August’s set of Chinese trade data fails to impress.

Another monthly drop in imports may provoke fresh market anxiety as the risk of further disruption stemming from the ongoing pandemic.

Unless the world’s second-largest economy can shake off Covid-19 worries and stage a sustained recovery in the second half of the year this could weigh heavily on AUD exchange rates.

With the Australian economy already struggling the threat of trade disruption persisting for longer may give investors fresh incentive to sell out of the Australian Dollar

Lingering Brexit Uncertainties Set to Limit GBP/AUD Exchange Rate Upside

Growing tensions over the issue of Brexit may limit the GBP/AUD exchange rate’s ability to return to an uptrend, though.

With UK and EU officials still lacking agreement on key issues in spite of the rapidly approaching December cut-off the risk of additional economic disruption remains.

As long as the UK appears on course for a hard Brexit scenario any confidence in current signs of an economic rebound is likely to fade.

Even so, as forecasts point towards another solid performance from the Halifax house price index this could still shore up the GBP/AUD exchange rate on Monday.

Louisa Heath

Contact Louisa Heath