Pound Australian Dollar (GBP/AUD) Exchange Rate Slips amid Commodities Sell-Off
(Updated 16:40 12/07/22)
The Pound Australian Dollar (GBP/AUD) exchange rate fell further today. A global flight to safety saw investors rapidly selling riskier commodities such as iron ore. Prices of iron fell by around -2% today. This likely harmed the ‘Aussie’ and pulled the currency pair lower.
The Pound fell to a two-year low against the US Dollar (USD) today as the UK’s leadership contest continues. This may have also contributed to the exchange rate’s downward momentum today.
At time of writing the GBP/AUD exchange rate is at around $1.7570, which is down around -0.5% from this morning’s opening figures.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Dips amid Poor UK Outlook
The Pound Australian Dollar (GBP/AUD) exchange rate is slipping today. Further data releases suggesting a poor outlook for the UK economy may be causing the fall in the currency pair. Major losses could be limited by a fall to commodity prices however, as well as the reintroduction of mass Covid-19 testing across China.
At time of writing the GBP/AUD exchange rate is at around $1.7602, which is down around -0.3% from this morning’s opening figures.
Pound (GBP) Slumps as Retail Sales Fall for Third Consecutive Month
The Pound (GBP) is tumbling against its competitors today. An above-forecast fall to June’s retail sales may be keeping the currency suppressed as figures fell for the third consecutive month.
Data collected by the British Retail Consortium (BRC) showed sales volumes falling by the most since the effects of the Covid-19 pandemic. Soaring inflation has continued to limit household spending and pushed business prices higher.
BRC chief executive Helen Dickinson said:
‘While the jubilee weekend gave food sales a temporary boost, and fashion sales benefited from the summer holiday and wedding season, this was not enough to counter the substantial slowdown in consumer spending.’
The ongoing leadership contest to replace PM Boris Johnson may also be limiting bets on Sterling today. Markets may remain uncertain as most candidates seem to be favouring a pro-Brexit approach. Many hopefuls are also running on a platform of drastic tax cuts which analysts fear may add to inflationary pressures.
On the other hand, such a move could increase the chances of further rate hikes from the Bank of England (BoE) and help to bolster Sterling.
Australian Dollar (AUD) Slips as China Reintroduces Mass Covid Testing
The Australian Dollar (AUD) is suffering amid a risk-off market mood today. Global recession fears have also dented the commodities market which may be gapping gains for the ‘Aussie’.
The ‘Aussie’ has seen poor performance in recent days as China, its primary trading partner, has once again rolled out mass Covid-19 testing in Shanghai. The city has seen multiple small-scale outbreaks as the Chinese officials continue to pursue a ‘dynamic zero-Covid’ policy.
China’s Covid-19 concerns may have also fuelled a demand-led drop in the price of iron ore. Steel mills in the country are also scaling back output amid sluggish orders and high inventories. The price drop could weigh on AUD today.
Declining business confidence in Australia could also pull the currency lower today. Confidence fell in June amid rising costs and slowing consumer spending.
Consumer sentiment for July also fell drastically today as soaring inflation continues to worsen the country’s cost-of-living crisis.
GBP/AUD Exchange Rate Forecast: Will UK GDP Stagnation Push Sterling Lower?
Looking to the week ahead for Sterling, a speech from BoE Governor Andrew Bailey could prompt movement in the Pound later today.
A stagnation in May’s GDP figures on Wednesday could dent confidence in the currency. The growth slowdown could contribute to the UK’s already gloomy economic outlook.
Further developments surrounding the UK’s leadership contest could also weigh on the Pound this week. Tensions between the UK and EU over the Northern Ireland Protocol could also push GBP lower.
For the Australian Dollar, a forecast narrowing of China’s trade surplus on Wednesday could cap gains for the ‘Aussie’.
On the other hand, Thursday’s employment figures could bolster AUD if they print as forecast. Unemployment is expected to dip to a new record low which increase bets on further rate hikes from the Reserve Bank of Australia (RBA).