GBP/AUD exchange rate flatlines on disappointing sales release
The pound Australian dollar (GBP/AUD) exchange rate is trending broadly sideways today, following the release of the UK’s latest retail data. Meanwhile, a lack of data from Australia leaves the Australian Dollar (AUD) subdued against its peers.
At the time of writing, GBP/AUD is trading at A$1.9314, having risen marginally in the past 24 hours.
Pound (GBP) softens as retail sales tumble
The pound (GBP) is weakening this afternoon, depressed by this morning’s data release. Sales in the UK fell by 1.2% in June, rather than 0.4% as forecast.
Election uncertainty and poor weather have been blamed for the disappointing reading: sales fell across all sectors except for fuel according the Office for National Statistics (ONS). Erin Brookes, European Retail and Consumer Lead at Alvarez & Marsal, said:
‘The poor weather in June saw disappointing sales of summer goods including across food and clothing.
Looking ahead, England reaching the final of the Euros, and the start of the school holiday, may have driven sales higher in July, but retailers will be concerned about structural volume decline against a backdrop of intensifying competition.’
Meanwhile, hawkish expectations for the Bank of England (BoE) no longer appear to be lending Sterling such tailwinds as were initially inspired. As other global central banks contemplate imminent interest rate cuts, restrictive monetary policy in Britain is beginning to take a toll on GBP sentiment.
While higher interest rates equal higher returns for currency investors, they limit activity such as consumer spending and hiring levels. Such impacts are detrimental to economic growth, as is made evident via the UK’s latest data releases.
Australian dollar (AUD) depressed by risk-off mood
The Australian dollar is sinking lower against its peers today following an uptick during Thursday’s session. AUD was supported by the addition of 50.2K jobs in the country’s economy – far more than the 20K forecast.
Nevertheless, downbeat market sentiment is limiting ‘Aussie’ headwinds at the end of the week. Ahead of final comments from Federal Reserve policymakers before the start of the central bank’s blackout period, markets are hesitant of placing hawkish bets.
A lack of Australian data today further exposes the Australian Dollar to losses. Traders are weighing up the likelihood of an interest rate cut from the Reserve Bank of Australia (RBA) following yesterday’s employment report, while also mulling over recent Chinese headwinds.
China’s Third Plenum concluded yesterday without definite measures to revitalize the country’s faltering economy. UOB Group economist Ho Woei Chen observed:
‘The communique reaffirms China’s focus on high quality development […] without announcing further stimulus for near-term growth. Markets await more policy details […] to provide more concrete measures to address the economic headwinds.’
Following mixed Chinese data on Monday, the lack of action likely heightened concerns regarding economic stability in the world’s second-largest economy, weighing on the ‘aussie’ given the close trading relationship between China and Australia.
GBP/AUD forecast: exchange rate to trend upwards?
As afternoon trading gets underway, GBP/AUD appears to be attempting a modest rebound. Sterling may be receiving tailwinds against its perceived-riskier peers as a result of the current risk-off mood.
If Fed policymakers strike a dovish tone this afternoon, bearish sentiment in the markets may intensify, potentially propelling the Pound higher against NZD. On the other hand, a bold tone could inspire a recovery in risk appetite, sending the ‘kiwi’ higher against GBP.