Pound Australian Dollar Exchange Rate Falls on Upbeat Australian Retail Sales
The Pound to Australian Dollar (GBP/AUD) exchange rate is trending lower today in response to Australia’s robust retail sales print. Meanwhile, the Pound (GBP) is facing headwinds as UK political uncertainty continues amid the country’s cost-of-living crisis.
At the time of writing, the GBP/AUD exchange rate is trading at approximately AU$1.77, down roughly 0.6% from today’s opening levels.
Australian Dollar (AUD) Rises as Australian Retail Sales Reach Market Forecasts
The Australian Dollar (AUD) is gaining ground against the majority of its peers this morning amid a positive market mood and robust domestic retail sales figures.
April’s preliminary figures revealed retail sales increased by 0.9%, in line with market forecasts, following a gain of 1.6% in March.
This is the fourth consecutive month of sales growth and indicates consumer spending remains robust in spite of headwinds facing the economy.
The largest increase was attributed to strong retail trade in the food sector as consumer spending rose during the April holiday period. Meanwhile, trade in household goods dropped significantly.
Economist Callam Pickering believes the spending is ‘certainly a positive early development’ for economic growth in the second-quarter.
Pickering said:
‘Cost pressures from retailers have been passed on to consumers but so far that isn’t having any meaningful impact on consumer spending patterns.’
As a result, the strong economic outlook may further boost Reserve Bank of Australia (RBA) interest rate hike bets.
The bank recently raised interest rates to 0.35%, and with more aggressive action being priced-in, it’s bolstering AUD exchange rates today.
Pound (GBP) Falls as UK Cost-of-Living Crisis Continues
The Pound is slipping against the Australian Dollar this morning amid the ongoing UK cost-of-living crisis.
Analysts have warned the UK may be heading towards a recession, particularly as household incomes fail to keep up with soaring inflation. Inflation reached 9% in April, and with the Bank of England’s (BoE) bleak forecasts, GBP investors remain cautious.
Yesterday the UK Chancellor, Rishi Sunak, unveiled a new fiscal support package.
Sunak believes the new measures – worth £15bn – will offer ‘significant support’ to those facing ‘acute distress’ regarding energy prices.
Sunak’s support measures will provide £400 worth of financial aid to all UK households, as well as additional support to 8m households with the lowest incomes.
In turn, this is partially alleviating the cost-of-living anxiety, and capping GBP’s losses.
Pound Australian Dollar Exchange Rate Forecast: Will UK Politics Continue to Dent GBP?
Looking ahead, the Pound Australian Dollar exchange rate is likely to be influenced by internal developments.
In addition to concerns over the cost of living crisis this could see ongoing Brexit uncertainty limit the upside potential of the Pound.
Into next week, the China-proxy Australian Dollar may be dented by Chinese manufacturing PMI. The factory sector is forecast to have contracted again in May, likely stoking concerns that demand for Australian exports will have softened.
In addition, the risk-sensitive ‘Aussie’ may continue to be governed by risk appetite.