Pound Australian Dollar (GBP/AUD) Exchange Rate Slides from Monthly Tops despite Upbeat UK Sales

GBP/AUD Exchange Rate Softens Ahead of Brexit Negotiations

The Pound Australian Dollar (GBP/AUD) exchange rate is muted this morning despite UK retail sales exceeding expectations. Pound (GBP) investors retain a bearish bias ahead of talks between the UK and European Union.

At the time of writing, GBP/AUD is trading at A$1.8548, virtually unchanged from today’s opening levels.

Pound (GBP) Faces Pressure as UK-EU Talks Eyed

The Pound is subdued against the majority of its peers this morning as markets hold their breath ahead of scheduled Brexit talks.

While tensions between the UK and Brussels appear to have eased in recent days, Brexit Minister Lord Frost warned yesterday that article 16 was still ‘very much on the table’ as the UK’s position on Northern Ireland has not softened.

Also dampening Sterling sentiment is a mixed analysis of the UK’s retail sales data. UK figures for October sales were released this morning, revealing an increase of 0.8% overall, as opposed to expectations of a 0.5% rise.

While the data is good news on the whole, chief economist Grant Fitzner at the Office for National Statistics (ONS) observes that although sales overall are above pre-pandemic levels, fuel, food and online sales fell.

Helen Dickinson, chief executive of the British Retail Consortium also notes that supply chain problems continue to hurt the retail sector.

Australian Dollar (AUD) Trades Mixed on Chinese Headwinds

The Australian Dollar (AUD) is facing mixed stimulus today, wavering against several peers on rumours of a Chinese spending slowdown. Losses are capped, however, as Covid-19 lockdowns were lifted yesterday in the state of Victoria.

Chinese online retail giant Alibaba recently forecast that its annual revenue would grow at the slowest pace since its stock market debut in 2014 given disappointing quarterly figures. Projections reflect increasing competition as well as effects from Beijing’s regulatory crackdown.

Subsequently, Alibaba shares slumped by more than 10% in Hong Kong trade: as Australia’s biggest trading partner, headwinds in the Chinese economy exert pressure on the ‘Aussie’, too.

Limiting AUD downside, however, Australians are optimistic as restrictions ease in the state of Victoria. The state surpassed 90% vaccination coverage, meaning masks no longer need to be worn unless in a high-risk setting, and density limits in hospitality venues are scrapped.

Victorian Premier Daniel Andrews commented on the development:

‘Whether it’s 100,000 people at the MCG on Boxing Day or a smaller group of people standing up at the … local pub, this is the COVID-normal that every Victorian has built.’

GBP/AUD Exchange Rate Forecast: External Factors to Drive Movement?

Looking ahead, a lack of significant data through the remainder of the session leaves the Pound Australian Dollar exchange rate to trade on external factors.

Increasing tensions between Britain and the EU may lead to further GBP downside, although general cooperation would likely lend support; the Australian Dollar, meanwhile, could come under pressure if consumer sentiment in China wanes further.

Olivia Evershed

Contact Olivia Evershed