Pound Australian Dollar Exchange Rate Slips as UK Retail Sales Underperform
The Pound to Australian Dollar (GBP/AUD) exchange rate falls as UK retail sales figures miss market forecasts.
At the time of writing, the GBP/AUD exchange rate is trading at approximately $1.7526, roughly down 0.2% from today’s opening levels.
Pound (GBP) Edges Lower on Weak UK Retail Sales
The Pound (GBP) is down against many of its peers this morning after UK retail sales fell short of expectations.
In February, retail figures unexpectedly contracted by 0.3%, tumbling from a 1.9% expansion in January and missing forecasts for a 0.6% rise.
According to the Office for National Statistics, internet sales witnessed a sharp decline, with non-store sales down by 4.8%.
Meanwhile, clothing and department stores saw an increase in sales, possibly due to ‘wider socialising and the return to the office following the shift of Plan B restrictions at the end of January.’
However, this might also show early signs that UK’s cost-of-living crisis is starting to suppress consumer spending, particularly after inflation reached a 30-year high in February.
The consumer price index jumped from 5.5% to 6.2% last month, and is expected to surge to 8% by mid-April.
Analysts suggest things could get worst in the coming months.
Martin Beck, chief economic advisor to the EY ITEM Club, said:
‘2022 has got off to a mixed start for retailers, and things will soon get tougher.
‘The EY ITEM Club now expects inflation to average well over 6% this year and, with this week’s Spring Statement offering limited support, there is still likely to be the biggest squeeze on household finances for more than a decade.
‘Some households may be able to dip into savings accumulated during the pandemic, but many won’t have that luxury. So, retail demand is likely to come under increasing pressure as we move through 2022.’
Australian Dollar (AUD) Trades Higher amid Strong Commodity Prices
The Australian Dollar (AUD) is climbing against the Pound (GBP) this morning as commodity prices remain elevated.
The war in Ukraine has seen prices for some of Australia’s main exports, such as gold and iron ore catapulted higher over the past month.
According to Kristina Clifton, FX Strategist at Commonwealth Bank of Australia, ‘the Australian economy is less exposed to the war than the UK [and] higher commodity prices are also a windfall for Australia…’
Despite this, the conflict is still weighing on risk appetite as the continued shelling of civilian targets throughout Ukraine suggests peace talks have not yet made any serious impact.
In turn, many investors are shying away from the risk-sensitive Australian Dollar.
Further causing injury to AUD is China’s ‘Zero-Covid Policy’, which has seen regions of China placed into lockdown.
According to Xi Jinping, Chinese authorities have implemented various Covid measures to ensure ‘the maximum prevention and control at the least cost, and minimise the impact of the epidemic on economic and social development.’
Should the Chinese economy struggle to maintain momentum during this time, it may weigh on demand for AUD.
Pound Australian Dollar Exchange Rate Forecast: Russia-Ukraine War to Remain in Focus
Looking ahead, Russia’s invasion of Ukraine is likely to remain a key catalyst of movement in the Pound Australian Dollar exchange rate in the near-term.
Should geopolitical developments keep commodity prices high, it may boost AUD. Meanwhile, if negotiations continue to hit roadblocks, it is likely to weigh on GBP.
An absence of notable UK economic data for the rest of today’s session will leave the Pound susceptible to market movement and external factors.
Into next week, the ‘Aussie’ may come under pressure if preliminary retail sales figures for February slip as expected. Economists forecast sales growth will have slipped from 1.8% to 1%.