Pound Australian Dollar Exchange Rate Lifted by UK Distributive Trades
The Pound Australian Dollar (GBP/AUD) exchange rate is trending up this morning as UK trade data supports the Pound (GBP).
While the Australian Dollar (AUD) is cushioned by surging iron-ore prices in China, GBP has overcome headwinds over Brexit and disappointing rate hike forecasts as CBI figures more-than-double expectations.
At the time of writing, GBP/AUD is trading at A$1.8403, up 0.2% from today’s opening levels.
Pound (GBP) Rises on CBI Distributive Trades
The Pound is climbing today following an uneven start to the session, as the UK’s distributive trades data prints higher than expectations. The data was expected to report a new sales balance of +13, but instead rose to 30 for the month of October.
Prior to the release, GBP was trading in a narrow range as UK Brexit Minister David Frost reported that the EU’s proposal on the Northern Ireland protocol was not going ‘far enough’ to free up trade in the region. Talks continue between the UK and European Union this week regarding the protocol.
According to the Confederation of British Industry, today’s higher-than-expected trades figure may be due to an acceleration in retail sales and orders growth rates, partly reflecting a comparison with last October when both declined amid rising Covid-19 cases.
Meanwhile, stock levels reached a record low for the seventh consecutive month, as supply chain pressures mount. According to Ben Jones, CBI Principal Economist, it’s crucial that the Government remains agile to support the sector.
Australian Dollar (AUD) Supported by Risk Appetite
The Australian Dollar (AUD) is climbing modestly against the majority of its peers as a risk-on market mood supports the ‘Aussie’.
Investors are optimistic as US President Joe Biden signed an order to lift travel restrictions, while news out of China that Evergrande managed to repay its $83.5m bond interest payment has also bolstered trading confidence.
Tomorrow’s inflation release is likely to affect exchange rates going forward as the data is set to fall on last month. As the Reserve Bank of Australia (RBA) already favours a dovish outlook, this is likely to remain unchanged.
Not everyone is sure, however – given New Zealand’s eye-watering inflation rise last week, economists fear that CPI may come in above market consensus. Anything above 3% is still outside of the RBA’s target range and may persuade policymakers to look at tightening monetary policy sooner.
According to Katrina Ell, a senior economist with Moody’s Analytics in Sydney, Wednesday’s number stands to be ‘incredibly important’. She notes that:
‘Victoria and New South Wales were in extended lockdowns through part or all of the September quarter… so we would have expected to see a slowdown [were it not for] severe global supply chain disruptions causing prices to increase.’
GBP/AUD Exchange Rate Forecast: Australian Inflation to drive Movement?
Looking ahead, tomorrow’s Australian inflation release is likely to influence the Pound Australian Dollar exchange rate, indicating the extent to which recent supply chain issues have affected the country’s economy.
Meanwhile, the Pound is likely to find continued support on its October distributive trades data: although headwinds may emerge in the form of UK-EU tensions over the Northern Ireland protocol.