GBP/AUD Cements Gains at Close of European Session
(Updated 17:50, 28/07/2022) The Pound Australian Dollar (GBP/AUD) exchange rate climbed overall through Thursday’s session, despite multiple UK headwinds, as risk-off sentiment weighed upon the Australian Dollar.
Weaker-than-expected retail data continued to depress the ‘Aussie’ throughout the day, despite improving business optimism in New Zealand, which boosted AUD’s sister currency. Meanwhile, market mood remained downbeat as fresh data showed that the US economy – the largest economy in the world – shrank by 0.9% last quarter.
In Britain, Pound tailwinds were capped by news of further strikes ahead. Workers at Felixstowe docks voted overwhelmingly for strike action in August, as the Unite union rejected a 5% pay rise offer.
The offer would still represent a cut to workers’ real pay, as retail price inflation stands at 11.8%.
‘Workers should not be paying the price for the pandemic with a pay cut,’ said the Unite general secretary, Sharon Graham; ‘The bottom line is this is an extremely wealthy company that can fully afford to give its workers a pay rise.’
Original article continues below:
Pound Australian Dollar Exchange Rate Wavers on Weaker Market Mood
The Pound Australian Dollar (GBP/AUD) exchange rate has wavered so far this morning as a relatively bearish market mood subdues appeal for both currencies. The Australian Dollar (AUD) is under particular pressure as investors digest weaker-than-expected AU retail data.
At the time of writing, GBP/AUD is trading at A$1.7381, virtually unchanged from today’s opening levels.
Australian Dollar (AUD) Succumbs to Downside
The Australian Dollar is trading broadly lower against its peers today, weakened by risk-off trading sentiment and disappointing retail data.
Market mood soured somewhat in the wake of yesterday evening’s interest rate announcement from the Federal Reserve, as the central bank decided to hike rates by 75bps. Chairman Jerome Powell said the Fed would no longer be providing any rate guidance.
Subsequently, US stock index futures dropped into negative territory, indicating that investors are turning cautious.
During the Asian session, preliminary retail data for the month of June revealed that sales increased by 0.2% rather than the 0.5% expected. This marks the softest rise in retail trade since a fall in December 2021.
Economists at Reuters speculate that June’s release may be a sign that soaring inflation and rising interest rates are finally curbing consumer demand.
Ben Dorber, head of retail statistics at the ABS, observed:
‘Results were mixed across the six industries, with turnover rising in three of them and falling in the others, as cost-of-living pressures appear to be slowing the growth in spending.’
Cafes, restaurants, and takeaway food services saw the largest rise in sales, while department stores experienced the largest fall.
Pound (GBP) Trades Mixed as Energy Companies Profit amid Cost-of-Living Crisis
The Pound (GBP) is resisting significant losses so far today despite a lack of UK data and ongoing scrutiny of the cost-of-living crisis.
Attention is focused upon companies making a profit while households and small business struggling to cope with rising inflationary pressures. Consumer goods firm Reckitt Benckiser was in the headlines yesterday and is succeeded today by energy firms Centrica and TotalEnergies.
Former Energy UK Chief Angela Knight has called the morality of such profit margins into question, saying:
‘There is a big question mark over those making extraordinary profits from an extraordinary world situation.’
Centrica – British Gas’s parent company – attributes its success to upstream businesses’ reflecting strong production and generation volumes, and the impact of higher commodity prices.
Nevertheless, the business insists that it is ‘very aware’ of the impact of soaring bills up on customers and is investing over £100m in customer service, support and pricing over 2022.
Potentially capping Sterling losses are bets that the Bank of England (BoE) could strike a hawkish tone at its policy meeting next week.
Markets have priced in a 25bps rate hike, but there is some chance this could be revised up.
Pound Australian Dollar Exchange Rate Forecast: Trading Sentiment to Influence Movement?
Looking ahead, external factors may affect the Pound Australian Dollar exchange rate, given a lack of further data through today’s European session.
If risk aversion persists, Sterling will likely retain the upside – although any volatility in political developments, including the contest for the UK’s next prime minister, could inspire GBP downside.