GBP/AUD exchange rate peaks at 8-day high
The pound Australian dollar (GBP/AUD) exchange rate continues to climb today, as the Australian dollar (AUD) comes under pressure. Weaker-than-forecast retail data has depressed the currency, alongside declining activity in China’s manufacturing and non-manufacturing sectors.
At the time of writing, GBP/AUD is trading at A$1.9279, almost 0.8% higher than 24 hours previously.
Australian dollar (AUD) subdued amid multiple headwinds
The Australian dollar is sinking against its peers today as investors mull over this morning’s disappointing retail release.
During the early Asian session, preliminary data for the month of March printed at –0.4% rather than the 0.2% expected. This marked the first decline in sales since December: The Australian Bureau of Statistics (ABS) remarked that turnover fell in all industries including clothing, footwear, department stores and household goods.
Ben Dorber, ABS head of retail statistics, elaborated upon the release:
‘Consumers pulled back on retail spending in March as cost of living pressures remained high. Underlying retail turnover has been flat for the past six months and was up only 0.8 per cent compared to March 2023.’
Meanwhile, downbeat data from China compounds ‘Aussie’ headwinds. For the month of April, China’s NBS manufacturing PMI declined to 50.4 from 50.8 in March, while the country’s non-manufacturing PMI decreased to 51.2.
The International Monetary Fund (IMF) recently stated that China’s economic growth is likely to decelerate in the coming years; today’s data may be interpreted as a forerunner of weak data to come. Given the close trading relationship between China and the Antipodean countries, a weak economic outlook for the former generally weighs upon trading sentiment in Australia.
Pound (GBP) faces headwinds amid lack of strong UK data
The pound (GBP) is trading in a mixed range against its rival currencies this afternoon, pressured by market uncertainty ahead of tomorrow’s interest rate decision and monetary policy statement from the US Federal Reserve Bank.
Trepidation ahead of the event has sapped risk appetite somewhat, drawing support away from the risk-on currency. Elsewhere, a lack of significant UK data leaves sterling sentiment turning sour.
In recent days, investors have focused upon the hawkish forecasts of several Bank of England (BoE) policymakers, including Jonathan Haskel and Chief Economist Huw Pill – yet opinion is divided within the central bank over the likelihood of easing inflation in the near term.
This discord between members of the Monetary Policy Committee (MPC) could be contributing towards pound headwinds.
According to a recent poll, around 57% of the 21 economists surveyed think the bank will start cutting rates in August; a further 38 per cent expected the first reduction in June.
A lead economist at the Confederation of British Industry, Alpesh Paleja, observes:
‘We’re probably getting closer to the point where the majority of the Monetary Policy Committee (MPC) will vote to reduce rates. But there’s still a fair degree of apprehension about domestic price pressures.’
GBP/AUD exchange rate forecast: Fed decision in focus
Tomorrow, the Federal Reserve’s monetary policy outlook will be highly scrutinised for indications as to when the bank is likely to cut interest rates.
Market speculation will have an impact across multiple exchange rates, given the wide repercussions of central bank intervention in the world’s largest economy. A particularly dovish tone from Fed Chairman Jerome Powell may prompt experts to reconsider their position that the Bank of England will cut before the Fed.
Nevertheless, the expectation is for policymakers to reiterate their earlier position, that consistent signs of deceleration will be necessary before the central bank considers loosening restrictive monetary policy.