Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks on Distributive Trades Data
The Pound Australian Dollar (GBP/AUD) exchange rate is tipping lower today following the release of a dismal distributive trades release. This follows a steep uptrend yesterday as Australian inflation printed below expectations.
At the time of writing, GBP/AUD is trading at A$1.9055, almost half a percentage point below opening levels.
Pound (GBP) Sentiment Dampened by CBI Release
The Pound (GBP) has slumped in several exchange rates so far today, as data from the Confederation of British Industry (CBI) printed well below expectations.
July’s distributive trades release was forecast to print at –2 this morning; which would’ve been an improvement from the previous reading of –9. Instead, the UK’s sales balance printed at –25, reflecting the cost pressures of today’s retail environment.
CBI economist Martin Sartorius said of the situation: ‘Firms remain cautious about the retail sector’s near-term outlook as they pare back on orders and brace themselves for another sales contraction in the year to August.’
Elsewhere, a risk-on mood is helping to limit GBP losses. The tone of the Federal Reserve bank in its latest policy statement was dovish, inspiring confidence in the currency market as investors anticipate easing interest rates in the US. This would have a positive knock-on effect for the world economy.
Australian Dollar (AUD) Buoyed by Risk-On Mood
The Australian Dollar (AUD) is trending up against the Pound and a number of other rival currencies, with a risk-on mood fuelling the currency’s recovery following yesterday’s slump.
The ‘Aussie’ tumbled against its peers during Wednesday’s Australian session and subsequently, European trading hours. The downslide was triggered by a weaker-than-expected inflation reading: annualised inflation in Q2 2023 fell to 6% from 7% the previous quarter.
The release prompted speculation that the Reserve Bank of Australia (RBA) may have overtightened interest rates and set expectations for more dovish policy moves ahead.
Economists at NAB suggested the RBA may be near its interest rate peak, though acknowledged ‘the inflation picture suggests the risk remains of some further tightening in Australia in the next few months.’
Today, Australian data printed above expectations: the import price index dropped 0.8% in the second quarter against the market consensus of a 7.3% decline. While export prices fell by 8.5% – worse than expected – the former release may be helping to prevent further AUD losses.
GBP/AUD Forecast: AU Retail Data to Boost Exchange Rate?
GBP/AUD may climb once more tomorrow, if Australia’s preliminary retail sales reading for June prints at 0%. Slowing sales in the country would reinforce economists’ assessment that the economy is struggling amid ongoing inflationary pressures and high interest rates.
Meanwhile, a continuing risk-on mood would support both the Pound and the Australian Dollar. Nevertheless, Sterling may yet succumb to headwinds amid persistently high energy prices and the UK’s ‘mortgage crisis’, alongside fears of a recession.