Weak Retail Sales Weighed on Australian Dollar
Confidence in the Australian economy was knocked back on Monday morning by a disappointing monthly retail sales figure for December. Rather than showing a modest uptick, sales instead were found to have contracted -0.1% on the month, indicating that consumer spending had weakened at the end of the year. Although the TD Securities inflation estimate picked up further to 2.1% in January this was not enough to shore up the softened Australian Dollar (AUD), particularly as general market risk appetite remained weak.
Although Brexit jitters continued to weigh on the appeal of the Pound (GBP), investors were encouraged by a solid increase in UK car sales. The number of new cars registered jumped to its highest monthly level since 2005, boding well for the wider economy. While consumer spending and confidence are still likely to be eroded over coming months, as wages are increasingly squeezed by inflation, this strong showing nevertheless boosted the Pound Australian Dollar (GBP AUD) exchange rate in the short term.
GBP AUD Exchange Rate Forecast: RBA Meeting In Focus for ‘Aussie’
Overnight the GBP AUD exchange rate is expected to experience volatility in response to the latest Reserve Bank of Australia (RBA) interest rate decision. Although investors do not anticipate any change in monetary policy at this juncture the potential for additional ‘Aussie’ weakness remains, with any dovish comments likely to weigh heavily on the antipodean currency. However, if the central bank indicates satisfaction with its current stance then the Australian Dollar may find a rallying point.
The Pound, meanwhile, may struggle to hold onto its recent gains as Parliament debates amendments to the government’s Article 50 bill. As Jakob Christensen, Chief Analyst at Danske Bank, noted:
‘The GBP could be further in focus this week as the House of Commons votes on the Article 50 bill on Wednesday. The vote is expected to be passed and put the government on course to trigger Article 50 on 9 March as planned. We expect the GBP to come increasingly under pressure as the triggering of the article 50 raises policy uncertainty.’
If MPs ultimately prove unsuccessful in altering the bill and effectively give Theresa May a blank cheque for negotiations this could see Sterling weaken significantly. Any further signs that the UK is heading for a hard form of Brexit would not encourage particular confidence in the Pound and leave the GBP AUD exchange rate lacking in support.
Current Interbank GBP AUD Exchange Rates
At the time of writing, the Pound Australian Dollar (GBP AUD) exchange rate was trending higher at 1.62, while the Australian Dollar Pound (AUD GBP) currency pair was slumped around 0.61.
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