The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate consolidated and extended declines during the European session on Thursday as investors ditched the Pound in response to below-forecast UK sales data.
The British asset had already lost some appeal thanks to Wednesday’s flat Bank of England (BoE) meeting minutes.
After the minutes were published (showing a nine-nil vote in favour of holding interest rates at record lows) the Pound dropped.
BoE Governor Mark Carney later delivered a speech in Glasgow and intimated that while the UK’s economy is gradually returning to ‘normal’ there are still risks to take into account. Carney said; ‘Since we start from a vulnerable position, we need to be especially careful [about raising interest rates]. The Monetary Policy Committee [MPC] is balancing the implications for inflation of hard evidence of sustained economic momentum against conflicting signals over the degree of slack in the labour market. Even when spare capacity is used up, bank rate will need to be materially lower than in the past in order to keep the economy operating at its potential and inflation at its target.’
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate went on to register additional losses during the Australasian session as the ‘Aussie’ was lifted by China’s impressive Manufacturing PMI.
The US Dollar to Australian Dollar (USD/AUD) exchange rate recovered previous declines as US Initial Jobless and Continuing Claims figures surprised to the upside.
The stimulus measures employed by the Chinese government helped the manufacturing measure achieve an 18-month high this month, an unexpectedly good result and one which boosts the economic prospects of China’s main trading partners, like Australia.
Economist Grace Ng said this of the result; ‘What that quite likely means is that what we have seen in terms of a pretty encouraging recovery in the second quarter will go and continue into the second half of the year. What we have in the economy right now is both that the external sector and the domestic sector are on a pretty steady recovery trend.’
After the UK’s retail sales figures revealed a less impressive than anticipated increase the Pound fell to a low of 1.7969 against its South Pacific counterpart.
However, with the close of European trading approaching and no influential economic reports for Australia scheduled for publication overnight, the GBP/AUD pairing firmed slightly to 1.8028 but was still down over 0.1% on the day’s opening levels.
In the hours ahead, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate could respond to the UK’s Gross Domestic Product Data.
It has been forecast that the UK’s economy expanded by 0.8% in the second quarter, mirroring the growth recorded in the first three months of the year. While a surprise to the upside would be Pound supportive, a lower-than-forecast result could drag the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate to fresh lows.
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