Pound Australian dollar (GBP/AUD) exchange rate muted amid souring market mood
Article updated 16:15, 28/5/2024:
The pound Australian dollar (GBP/AUD) exchange rate is remaining narrow this afternoon, as trading conditions turn more cautious.
Following a speech from Federal Reserve official Neel Kashkari, markets are concerned over the prospect of additional tightening from the Fed. As this would have a detrimental impact on the global economy, risk appetite has begun to wane.
This is prompting the pound (GBP) and Australian dollar (AUD) to remain relatively flat as investors seek safer options.
Additionally, markets are likely eyeing an August beginning to the Bank of England’s (BoE) interest rate cuts. This may be applying additional pressure to Sterling.
At the time of writing, GBP/AUD is trading at around AU$1.9189, showing little movement from the morning’s opening levels.
Original article continues below:
Pound Australian dollar (GBP/AUD) exchange rate flat despite bleak Australian retail sales
The pound Australian dollar exchange rate is wavering this morning, despite downbeat Australian retail sales data.
At the time of writing, GBP/AUD is trading at around AU$1.9187, showing little movement from today’s opening rates.
Australian dollar (AUD) wavers amid downbeat retail sales data
The Australian dollar (AUD) is enduring muted trade this morning, in the wake of the latest Australian retail sales data.
In April, sales increased on a monthly basis by 0.1%, which is undermining AUD by suggesting that spending is grinding to a halt. While sales increased from a decline of 0.4% in March, they came in below expectations of a 0.2% rise.
Ben Dorber, Head of Retail Statistics for ABS, commented:
‘Since the start of 2024, trend retail turnover has been flat as cautious consumers reduce their discretionary spending. Looking across the past two months, we see weak underlying spending in most parts of the retail industry.’
The weak spending is considered to be caused by elevated mortgage rates and increasing rents. Additionally, service inflation remains stubborn, and is further eating into consumer spending power.
However, due to a modestly upbeat market mood, the risk-sensitive ‘Aussie’ is managing to remain afloat against its peers.
Pound (GBP) muted despite upbeat retail data
The pound (GBP) is struggling to attract significant support from investors this morning due to a lack of impactful data.
This is likely pushing investor focus towards lesser data releases, such as the latest distributive trades data from the Confederation of British Industry (CBI).
In May, the CBI found that retail sales had improved significantly on a monthly basis, with the index printing at 8, up from -44.
Alpesh Paleja, Lead Economist at the CBI, commented:
‘May’s increase in retail sales adds to the swathe of data pointing to an improvement in activity over the near-term. Falling inflation, and continuing real wage growth will contribute to a healthier consumer outlook, in turn supporting the retail sector further.’
Elsewhere, analysis of the Bank of England’s (BoE) next steps may be pressuring Sterling. The BoE have cancelled all public engagements ahead of the July general election, which has lessened chances of a June rate cut.
Pound Australian dollar exchange rate forecast: Australian CPI in focus
Looking ahead for the Australian dollar, the core catalyst of movement is likely to be the latest monthly consumer price index indicator.
In April, inflation is forecast to have cooled to 3.4%, down from 3.5% in March. This could weaken the ‘Aussie’ by suggesting that the Reserve Bank of Australia (RBA) could have room to begin cutting interest rates.
For the pound, data releases are set to be few and far between in the short term, which may keep GBP exchange rates muted.
Additionally, focus is likely to remain on the Bank of England’s next steps. With an interest rate cut in June seeming more likely, GBP may see its upside limited.
Elsewhere, risk appetite is likely to play a role in shaping the pound Australian dollar exchange rate. As the ‘Aussie’ is more risk-sensitive, upbeat trade could weaken the pairing,