The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate rallied by around 0.74% on Thursday afternoon.
After British Retail Sales increased for the 26th consecutive quarter, the Pound rallied across the board. This aided the uptrend initiated by Bank of England (BoE) minutes which showed policymakers expect slack in the British economy to erode within a year.
The Australian Dollar, meanwhile, softened versus most of its major peers despite a weak US Dollar. The downtrend can be attributed to below-forecast manufacturing data out of China. Continued speculation that the Reserve Bank of Australia (RBA) will cut the cash rate in future policy meetings is also weighing on demand for the Oceanic asset.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.9873.
Pound Sterling (GBP) Exchange Rate Forecast to Strengthen versus the Euro on Hawkish BoE
After the BoE stated that slack in the UK is likely to dissipate within a year, the Pound strengthened versus its European counterpart. Slack erosion would see inflation rise, which in turn would lead to tighter monetary policy.
Thursday saw the Pound strengthen versus all of its major peers after sales data eclipsed expectations. Retail Sales increased by 1.2% on the month in April; bettering the market consensus of a 0.2% increase. April’s Retail Sales Including Auto also registered growth of 1.2% in April; eclipsing the median market forecast 0.4% advance.
‘April’s jump in retail sales fuels belief there is little risk of consumers delaying purchases in the expectation that prices will fall over the coming months,’ said Howard Archer, an economist at IHS Global Insight in London. ‘The prospects for retail sales and consumer spending look bright as purchasing power has strengthened and should continue to do so.’
The rise in sales was also linked to unseasonably hot weather which prompted consumers to buy summer clothing ahead of time.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate dropped to a low of 1.9646 today.
Australian Dollar (AUD) Exchange Rate Forecast to Soften versus the Pound on Chinese Manufacturing
Although the Dollar is trading in a relatively weak position after Federal Open Market Committee (FOMC) minutes printed dovishly, a gradual recovery is hurting demand for the high-yielding ‘Aussie’. Mixed US data on Thursday has seen the ‘Greenback’ (USD) climb slowly versus many of its rivals.
Data out of China also added downward pressure on the Oceanic currency. China’s Manufacturing PMI remained in contraction territory in May, with the result of 49.1 failing to meet with expectations.
Commenting on the Flash China Manufacturing PMI survey, Annabel Fiddes, Economist at Markit said; ‘The Flash China Manufacturing PMI pointed to a further deterioration in operating conditions in May, with production declining for the first time in 2015 so far. Moreover, softer client demand, both at home and abroad, along with further job cuts indicate that the sector may find it difficult to expand, at least in the near-term, as companies tempered production plans in line with weaker demand conditions.’
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Hold Gains on lack of Data
With an absence of further domestic data publications to provoke volatility for the pairing, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is likely to hold gains for the remainder of Thursday’s European session.
Friday will be quiet for the ‘Aussie’ with a complete absence of domestic data, but British economic publications may cause GBP/AUD volatility.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate climbed to a high of 1.9912 today.
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