Pound Australian Dollar (GBP/AUD) Exchange Rate Sideways amid Disappointing UK Retail Data
The Pound Australian Dollar (GBP/AUD) exchange rate is trading within narrow boundaries this morning, amid bleak UK retail data.
At the time of writing, GBP/AUD is trading at around AU$1.8983, showing little movement from the morning’s opening rates.
Pound (GBP) Stifled by Downbeat Festive Retail Data
The Pound (GBP) is under pressure this morning, following disappointing retail sales data for the festive period.
The British Retail Consortium (BRC) found that in December, retail sales increased by a meagre 1.7% year-on-year, compared to 6.9% growth in 2022.
Helen Dickinson, BRC Chief Executive, commented:
‘The festive period failed to make amends for a challenging year of sluggish retail sales growth, as weak consumer confidence continued to hold back spending. The post-Christmas sales were unsuccessful in enticing spend in areas such as furniture and homeware, with households remaining cautious about making larger purchases.’
With these numbers falling below the 12-month average of 3.6%, investors are concerned about the state of UK household finances. Spending appears to be slowing, despite the festive period, which may lead to imminent interest rate cuts from the Bank of England (BoE).
Australian Dollar (AUD) Ticks Down Despite Improved Retail Sales
The Australian Dollar (AUD) is edging lower this morning, but is likely being cushioned by a significant rebound in retail sales.
In November, sales recovered by 2% compared to October, significantly above forecasts of a 1.2% increase. This was likely down to retailers beginning with seasonal sales campaigns earlier than usual.
Robert Ewing, Head of Business Statistics at ABS, commented:
‘The strong rise suggests that consumers held back on discretionary spending in October to take advantage of discounts in November. Shoppers may have also brought forward some Christmas spending that would usually happen in December.’
However, the figures may have been skewed higher by black Friday spending, which can distort underlying patterns. With this in mind, investors appear hesitant to fully support the ‘Aussie’ despite the rebound.
Elsewhere, risk averse trade is likely weighing on the ‘Aussie’ as markets seek out safer assets this morning.
Pound Australian Dollar Exchange Rate Forecast: BoE Bailey Takes the Stand
Looking ahead for the Pound, BoE Governor Bailey is set to deliver a testimony to the UK Treasury committee tomorrow. Here, they will discuss the BoE’s monetary policy in December. Bailey is likely to pushback against any expectations of incoming interest rate cuts.
If he is convincing to markets, the Pound could strengthen as investors eye a more hawkish approach from the BoE. However, if he fails to convince that a March rate cut is unlikely, GBP could soften against its peers.
For the Australian Dollar, the core catalyst of movement is likely to be the monthly CPI indicator for November, due tomorrow.
Inflation is forecast to have cooled from 4.9% to 4.4%, which may weaken AUD. Recently, the Reserve Bank of Australia (RBA) has skewed hawkish, but cooling inflation may undermine the need for additional hikes.