The GBP/AUD exchange rate fell today, weighed down by strong Australian retail sales data and concerns over the UK economy. This follows last week’s decline in the pair, which was caused by disappointing UK employment data and expectations of an interest rate hike by the Reserve Bank of Australia (RBA).
The Australian Dollar (AUD) was supported by robust retail sales data from Australia, which indicated solid consumer spending despite high inflation and interest rates. Taylor Nugent of National Australia Bank (OTC:NABZY) suggested that this could lead the RBA to continue its tightening policy. The British Pound (GBP), on the other hand, struggled due to a lack of data that raised investor concerns about the U.K. economy and diminished expectations for a Bank of England (BoE) rate hike.
The BoE’s consumer credit report indicated a slowdown in government borrowing, which could support the UK’s economic recovery. However, the pound remained low due to factors such as the Israel-Hamas conflict and general market sentiment.
Expectations of a pause in the BoE‘s tightening cycle, a future hawkish speech from RBA Deputy Governor Brad Jones, and the RBA’s recent hawkish hints of another rate hike may continue to influence the GBP/AUD exchange rate. The AUD’s performance may also be influenced by the release of the October Manufacturing Purchasing Managers’ Index (PMI). Given its riskier nature compared to the Pound, the AUD may weaken if market sentiment turns sour.
Last week, the GBP/AUD reached a five-week high amidst anxious market sentiment, only to come under pressure from contractions in the UK manufacturing and services sectors. A strong inflation reading from Australia mid-week pushed the AUD to a three-week high against the GBP. This momentum was temporarily dampened by RBA Governor Michele Bullock’s indifferent stance on the inflation spike, until Westpac forecast an RBA rate hike in November, which restored AUD’s strength.
At the same time, the Confederation of British Industry’s (CBI) Distributive Trades Survey revealed the worst October reading for UK sales data since 2017, further dampening GBP. Key events to watch include the BoE’s interest rate decision and Australia’s September trade surplus, both of which could cause AUD volatility. Additionally, a dovish decision from the Federal Reserve could change market sentiment and subsequently impact AUD.
