Pound Australian Dollar (GBP/AUD) Exchange Rate Trends Sideways after Poor UK Retail Data

Pound Australian Dollar (GBP/AUD) Rangebound as UK Retail Sector Suffers

(Updated 16:30 26/07/22)

The Pound Australian Dollar (GBP/AUD) exchange rate recovered to trade within a narrow range at day’s end. A retreat to risk appetite helped the currency pair to recover some of its losses.

A downbeat assessment for the UK’s retail sector likely contributed to GBP/AUD’s downturn. The CBI’s latest distributive trades figures saw July’s retail sales balance drop to -4. Expectations for August’s sales fell further to -14.

The reading was the weakest since March 2021, and comes as the UK’s cost-of-living crisis continues to dent household spending.

At time of writing the GBP/AUD excchange raete is at around $1.7321, virtually unchanged from this morning’s opening figures.

Original article continues below:

Pound Australian Dollar (GBP/AUD) Exchange Rate Slips amid Risk-On Impulse

The Pound Australian Dollar (GBP/AUD) exchange rate is falling today. A poor outlook for the UK’s economy may be weighing on the currency pair. Uncertainty over the path of future rate hikes from the Bank of England (BoE) may also be limiting gains for GBP/AUD today. Finally, a continued rally to iron ore prices may also be pushing the exchange rate lower.

At time of writing the GBP/AUD exchange rate is at around $1.7230, which is down roughly -0.2% from this morning’s opening figures.

Pound (GBP) Drops amid Uncertainty over BoE Rate Hike Plans

The Pound is slipping against its competitors today. The impact of the UK’s cost-of-living crisis and soaring inflation may be pushing Sterling lower.

Reports released by a cross-party committee of UK MPs have found that soaring energy bills could plunge millions into ‘unmanageable’ debt this winter.

The report comes as Rishi Sunak and Liz Truss vie to become the UK’s next Prime Minister, potentially injecting uncertainty into the markets. This may also be weighing on Sterling today.

Mixed predictions regarding the Bank of England ‘s (BoE) future course of action may also be dampening enthusiasm for Sterling today. A survey by Reuters found that 90% of investors expect the central bank to hike interest rates by 0.5%.

Some economist feel that the BoE will act cautiously, however. Andrew Goodwin of Oxford Economics said:

‘We still narrowly favour a 25-basis-point rate hike at August’s meeting. But we wouldn’t be surprised if the MPC talked itself into a larger rise.’

Australian Dollar (AUD) Climbs as Iron Ore Prices Continue Rally

The Australian Dollar (AUD) is trending higher against its rivals today. A risk-on impulse in the markets may be helping the currency to make some gains.

A continued rally to iron ore prices may also be helping to push the ‘Aussie’ higher today. Prices of the commodity have continued to climb over investor hopes of a recovery in Chinese steel demand.

Traders also remain hopeful that the Chinese government will provide financial support to the country’s real-estate sector. The country’s ‘zero-covid’ policy has dampened economic activity in recent months.

Expectations for further significant rate hikes from the Reserve Bank of Australia (RBA) may also be helping to boost AUD today. Evidence of a tight labour market has led to bets of a possible above-forecast rate hike from the central bank.

Significant gains for the Australian Dollar could be limited by an ongoing surge to Covid-19 cases across the country, however. Hospital admissions for the virus have hit fresh highs for the second consecutive day. Around 330,000 admissions have been reported over the past seven days.

GBP/AUD Exchange Rate Forecast: Will UK Retail Sector Suffer Further?

Looking ahead for the Pound, distributive trades figures later today could pull the currency lower if they dip as forecast. The outlook for the UK’s retail sector is already poor after disappointing retail sales figures last week.

Political uncertainty and Brexit-related headwinds may also weigh on Sterling throughout the week. The currency could see losses limited by BoE rate hike bets, however.

For the Australian Dollar, investors will be keenly awaiting the release of second quarter inflation figures on Wednesday. If the rate of inflation climbs as forecast then it could boost AUD and increase bets on further rate hikes from the RBA.

Friday’s forecast dip to second quarter PPI figures could limit these gains, however. Thursday’s slowdown to retail sales growth could have a similar effect.

Gareth Monk

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