GBP/AUD Exchange Rate Edges Higher, US-China Trade Uncertainty Weighs on ‘Aussie’
The Pound Australian Dollar (GBP/AUD) exchange rate improved today, with the pairing currently trading around AU$1.881 after the Australian Wage Price Index held steady at 0.5% in the third quarter.
Analysts at Reuters commented:
‘The weak wage growth and consumer sentiment have weighed on consumption, which has become a “key uncertainty” for domestic outlook, forcing the Reserve Bank of Australia (RBA) to slash its benchmark rate to a record low of 0.75%.’
Australian Dollar (AUD) traders are remaining cautious, however, with deteriorating wage growth and US-China trade uncertainty likely pushing the RBA to reduce its interest rates further.
Shane Oliver, Chief Economist at AMP Capital, commented:
‘Ideally we need to see significant fiscal stimulus soon. However, in the absence of fiscal stimulus soon, the pressure remains on the RBA where we expect to see more rate cuts, quantitative easing and more dovish forward guidance on rates.’
The risk-sensitive ‘Aussie’ has also failed to gain against Sterling after US President Donald Trump heightened concerns over the US-China trade conflict, threatening that if the two superpowers failed to make a deal he would “substantially raise those tariffs” while adding that China is “dying” to make a deal with America.
With China being Australia’s largest trading partner, signs of division between the two superpowers weighs on market confidence in the risk-correlated Australian Dollar.
GBP/AUD Exchange Rate Improves despite UK Inflation Hitting a Three-Year Low
The Pound (GBP) improved against the weakened ‘Aussie’ despite today’s release of the UK inflation figure for October, which fell to its lowest level since 2016 at 1.5%.
Jing Teow, an Economist at PwC, commented:
‘Overall, the figures do little to change our view that inflation will spend more time below 2% than above it in 2020 and that if Brexit delayed further, interest rates will be cut in May 2020.’
Today also saw the UK Retail Price Index fall by 0.2% in October, placing a further strain on Britain’s struggling retail sector ahead of Christmas.
The GBP/AUD exchange rate has remained steady today, with Pound traders instead focusing on British political developments ahead of the 12th December general election.
GBP/AUD Outlook: Could Sterling Rise on Improving Retail Sales?
‘Aussie’ investors will be looking ahead to tomorrow’s release of October’s Australian unemployment rate figure, which is expected to rise to 5.3%.
Tomorrow will also see the release of Australia’s employment change figure for October, which is expected to rise from 14.7 thousand to 15 thousand.
Meanwhile, Sterling traders will be awaiting tomorrow’s publication of the UK retail sales figure for October, which is expected to improve from 3.1% to 3.7%.
British political developments will remain in focus this week, with any indications that the Tories could cement their lead in their polls likely to buoy the Pound on a return of political stability.