Pound Australian Dollar (GBP/AUD) exchange rate wavers as markets digest data
The Pound Australian Dollar (GBP/AUD) exchange rate is trending sideways today as traders weigh yesterday’s positive UK PMI readings against this morning’s dismal retail balance from the Confederation of British Industry (CBI). Meanwhile in Australia, the Reserve Bank of Australia (RBA) has released its latest bulletin.
At the time of writing, GBP/AUD is trading at A$1.9323, having seen minor gains in the past 24 hours.
Pound (GBP) trades in choppy range as retail data disappoints
The Pound (GBP) is trading sluggishly against its peers today following a disappointing distributive trades reading from the CBI. The confederation’s monthly retail sales balance dropped 18 points to -50 in January 2024, indicating that the country’s retail sales volumes declined at the fastest pace since January 2021.
Moreover, the index for volume sales for this time of year fell to -47 from -25 in December: the lowest level since May 2020. Commenting upon the release, Martin Sartorius, the CBI’s principal economist, said:
‘Looking ahead, demand conditions in the sector will remain challenging as higher interest rates continue to feed through to mortgage payments and household incomes.’
Nevertheless, Pound exchange rates remain somewhat supported by upbeat sentiment following Wednesday’s PMI readings. Both manufacturing and service sector activity surpassed expectations this month; while manufacturing activity remained in contraction territory, the reading nonetheless hit a 9-month high.
James Smith, an economist at ING, remarked of the data:
‘[The figures are] another signal that the consensus among economists going into this year, which suggests the UK will underperform most major European economies in 2024, looks a bit too gloomy.’
Australian Dollar (AUD) makes tentative gains in European session
The Australian Dollar (AUD) traded somewhat flatly overnight but is finding some support today despite moderate risk-off sentiment. Uncertainty ahead of US GDP data this afternoon, as well as persistent geopolitical tensions amid Israel’s sustained attacks on Gaza, caps market optimism.
The Reserve Bank of Australia published its latest bulletin overnight – but likewise, this appeared to have little effect on ‘Aussie’ performance. The RBA observed that about 7-11% ($7 billion to $11 billion) of Australia’s cash is being in the illegally in the shadow economy, to avoid tax or buy illicit drugs.
‘Banknotes can be used to make legitimate payments, but they can also be hoarded, lost or used to facilitate transactions in the shadow economy,’ the bank remarked. Nassim Khadem of ABC News reports that the declining cash use has prompted discussion of how soon Australia may go cashless.
A mixed performance in the Chinese economy may also be influencing AUD. While economic growth in the country comfortably hit last year’s target, international investors are wary: reflected by a persistent selloff in Chinese stocks and assets.
Reuters analysts’ note a disconnect between China’s positive official messaging and concerns over a deepening property crisis and local government debt crunch. Alfred Wu, associate professor at Lee Kuan Yew School of Public Policy in Singapore, confirms:
‘As a market player, you have no idea what’s going to happen tomorrow. That’s a scary thing. At the end of the day, it’s confidence – people don’t believe the narrative.’
GBP/AUD forecast: US PCE index to affect trade?
Into tomorrow, the latest PCE price index for the USA is likely to influence global market trade, given the US economy’s status as the largest in the world. If core price inflation increased as predicted last month, expectations of a dovish policy outlook from the Federal Reserve Bank will undoubtedly recede as restrictive monetary policy measures are deemed necessary.
Elsewhere, a lack of significant domestic data in Australia leaves the Australian Dollar at the mercy of risk flows and other external factors. The Pound may also fluctuate according to general market mood and ongoing commentary around the state of the UK economy.