Pound Australian Dollar (GBP/AUD) Exchange Rate Struggles to Hold onto Retail Sales Gains

June 14, 2018 – Written by John Cameron

UK Retail Sales Smash Expectations – Pound (GBP) Exchange Rates Fluctuate

Sterling posted a mixed performance against the Australian Dollar (GBP/AUD) on Thursday, rising in the morning as investors responded to a weak round of Australian labour market data and a strong UK retail sales print, but easing into the afternoon.

According to the Office for National Statistics (ONS), UK retail sales grew by 4.4% in May, up from the previous period’s 1.4% rise and the forecast of 2.5%.

This was largely due to the combined influence of the Royal Wedding and the recent summer heatwave.

Ian Gilmartin, Head of Retail at Barclays Corporate Banking shared his thoughts:

‘The truth is that despite continued rumours of the demise of our retail industry, many retailers are simply getting on with the job and continuing to attract customers through their doors’.

‘Of course, we’re not going to have a heatwave and a royal wedding to help drive sales every month, but the World Cup kick-off should help supermarkets in particular, maintain this momentum over the next month or so’.

The Pound Australian Dollar exchange rate struggled to hold onto its gains however, dropping later into the day.

Australian Dollar (AUD) Exchange Rates Encumbered by Weak Labour Market Data

The Australian Dollar (AUD) encountered some difficulty on Thursday, falling as investors responded to a mixed run of labour market statistics.

According to the Australian Bureau of Statistics, Australia’s jobless rate dropped to 5.4% in May, down from April’s score of 5.6%.

This was, at first sight, a positive reading, but looking deeper; analysts recognised that the drop was purely a result of a decline in the overall workforce participation rate – with the last 12k jobs being added in May being lower than the previous score and the forecast.

The Reserve Bank of Australia has been watching labour trends very closely, and signs of ongoing slack within the Aussie labour market did not bode well for rate hike prospects in the months ahead.

This outlook saw a drastic reduction in demand for the Australian Dollar.

Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: Worsening Global Trade Relations Bode Poorly for AUD

The outlook for the Australian Dollar (AUD) has grown increasingly gloomy in recent days, with worsening trade relations between the US and China lowering risk appetite and leaving chancier assets like the ‘Aussie’ Dollar floundering.

Despite apparent progress in negotiations, US President Donald Trump has signalled plans to hit China with even more aggressive trade action in the coming weeks, with a full list of Chinese goods that the US intends on slapping tariffs on set for release before the end of this week.

If no reconciliation is reached between the two superpowers and relations worsen, then we could see the Australian Dollar continue to face pressure.

This could, in turn, drive GBP/AUD even higher.

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TAGS: Pound Australian Dollar Forecasts