Pound Australian Dollar (GBP/AUD) Exchange Rate Slides as UK Retail Struggles
The Pound Australian Dollar (GBP/AUD) exchange rate is weakening this morning, following downbeat UK retail sales data.
At the time of writing, GBP/AUD is trading at around AU$1.9133, a drop of just over 0.3% from the morning’s opening rates.
Pound (GBP) Blighted by Falling Retail Sales
The Pound (GBP) is being undermined this morning by a surprisingly weak print for the UK’s retail sector.
Economists had forecast that, in October, retail sales would have expanded by 0.3%. Instead, they showed a further drop of 0.3%, the second monthly fall in a row.
Retailers found that consumers were being more cautious with money, amid elevated interest rates and persistently high inflation. Similarly, poor weather was found to have had an impact.
This is proving worrisome for the UK economic outlook, as we move into the vital festive season for retailers.
Victoria Scholar, Head of Investment at interactive investor, stated that:
‘Consumers appear to be holding off from unnecessary spending, in savings mode, preparing for the expensive festive season ahead. Looking ahead, according to analysis from GlobalData, shoppers are expected to buy fewer and cheaper items this Christmas, another headwind for retailers during the most important spending period of the year.’
However, Sterling’s losses appear to be being limited by a risk-on market mood. Due to the Pound’s increasingly risk-sensitive nature, the upbeat trade is acting as a cushion.
Australian Dollar (AUD) Directionless amid Lull in Data
Australian Dollar (AUD) exchange rates are largely rudderless this morning, despite climbing against GBP.
Due to a lack of data, investors have very little to sink their teeth into for the ‘Aussie’. However, a cautiously upbeat market mood is likely cushioning the risk-sensitive currency from further losses.
Furthermore, this could be keeping the focus on yesterday’s Chinese property data, as investors continue to mull the outlook.
House prices fell further again, sparking up fears over the sector. Investors believe that the Chinese Government has significantly more to do to shore up confidence.
Edward Al-Hussainy, Head of Emerging Market Fixed Income Research at Columbia Threadneedly, commented:
‘When confidence is low, the only entity that can solve it is the government and I think the government has to solve it by being very aggressive, very visibly aggressive, with language like ‘whatever it takes’’.
As a Chinese proxy-currency, the impatience may served to undermine the Australian Dollar’s position.
Pound Australian Dollar Exchange Rate Forecast: Central Bank Speeches in Focus
Looking ahead for the Pound, Bank of England (BoE) Governor Andrew Bailey is due to speak on Monday evening.
If he continues the BoE’s recent dovish communications, Sterling could struggle for support. However, if he keeps the door open for further tightening, GBP could strengthen.
For the Australian Dollar, the Reserve Bank of Australia (RBA) Governor Michele Bullock is also scheduled to speak on Monday.
If she maintains the RBA’s hawkish stance and moves to hint at future interest rate hikes, AUD could strengthen. However, if investors remain unconvinced that the RBA is set to continue its tightening cycle, AUD could slip.