Mixed UK Retail Sales Leave Pound to Australian Dollar (GBP/AUD) Exchange Rate Jittery

Pound to Australian Dollar Exchange Rate on Track for Modest Recovery

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is on track to sustain a modest recovery this week. This is despite a lack of solid optimistic developments for the Pound (GBP), which is only gaining on Brexit hopes.

Since opening this week at the interbank level of 1.75, GBP/AUD has seen a recovery of around a cent and a half. At the time of writing, GBP/AUD trends near the level of 1.77.

While this seems like a fairly strong recovery, Australian Dollar (AUD) resilience meant GBP/AUD couldn’t recover as much as other Pound pairings. This follows last week, when GBP/AUD plummeted over 6 cents from the week’s opening level of 1.82.

Next week’s economic calendar will be quieter. Pound and Australian Dollar investors will be reacting to potential developments in ongoing Brexit and coronavirus crises.

Pound (GBP) Exchange Rates Buoyed by Brexit Hopes despite Bank of England Dovishness

The Pound (GBP) dipped in the immediate aftermath of yesterday’s Bank of England (BoE) policy decision.

The bank said that Britain’s data had been better than expected, but remained concerned that the coronavirus pandemic would continue to damage Britain’s outlook.

Signs that the bank was looking increasingly seriously into negative interest rates briefly knocked Sterling. However, comments later in the afternoon that EU officials were still hopeful a Brexit deal could be reached.

Today’s UK retail sales results had little impact on the Pound. The data was mixed, but analysts remain concerned about how retail will fare in the coming months. According to Howard Archer, Chief Economic Advisor at the EY ITEM Club:

‘There is considerable uncertainty as to just how willing and able consumers will be to spend beyond the third quarter. Indeed, persistent consumer caution is seen as a significant risk that could limit the UK recovery.’

Australian Dollar (AUD) Exchange Rates Benefit from Market Risk-Sentiment

The Australian Dollar (AUD) is a currency often correlated to market risk and trade sentiment.

Over the past week, hopes for economic recovery from the coronavirus pandemic have been persisting. On top of this, there has been strong Chinese data and gains in prices of key commodities like iron ore.

With other notable currencies correlated to risk facing other concerns, the Australian Dollar has been among the more appealing major currencies as it benefits from the lingering risk-sentiment.

According to Jason Wong, Senior Markets Strategist at Bank of New Zealand:

‘Although difficult to predict, current relative commodity price trends are also in favour of the AUD,’

Pound to Australian Dollar (GBP/AUD) Exchange Rate to be Driven by Brexit Developments

Next week will see the publication of September PMI projections for both the UK and Australia. These stats will give investors a better idea of how economies are weathering the coronavirus pandemic this month.

However, unless these stats surprise, the Pound to Australian Dollar (GBP/AUD) exchange rate is more likely to be driven by non-data news amid a quieter economic calendar.

In particular, the Pound (GBP) remains highly sensitive to Brexit developments. If the UK government’s plans to rewrite the Brexit withdrawal agreement succeed, the Pound may come under further pressure.

On the other hand, any optimism regarding the possibility of a deal will make it easier for the Pound to recover.

Domestic coronavirus developments, such as new lockdown or lockdown softening, will of course continue to influence the Pound to Australian Dollar (GBP/AUD) exchange rate as well.

Josh Jeffery

Contact Josh Jeffery