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Pound Australian Dollar Exchange Rate News: GBP/AUD Wavers as Australian Retail Sales Rose to Another Record Level

July 28, 2022 - Written by John Cameron

Australian Dollar (AUD) Wavers as Retail Sales Missed Expectations

The Australian Dollar (AUD) is fluctuating today as retail sales printed below expectations but still recorded a sixth straight month of growth.

Despite falling short of a forecasted 0.5% growth, retail sales in Australia soared to another record level of $34.24Bn in June. The latest figure was the softest rise in retail since December of last year as cost-of-living pressures continued to weigh on consumers. The services sector saw the biggest jump with a 2.7% rise as cafes, restaurants and takeaway services enjoyed a surge in business.

The ‘Aussie’ is holding firm as softening retail sales are not enough to derail the Reserve Bank of Australia’s (RBA) plans to hike interest rates by 50bps next week. Analysts at Australia and New Zealand (ANZ) are not quick to decry the slowdown in retail sales as a sign of inflationary pressures, yet:

‘It isn’t clear yet whether this result is due to high inflation, rate hikes and low consumer confidence, or the strong uptake of overseas travel, which would shift some household spending away from the Australian retail sector.

‘ANZ-observed spending in June and July showed no cliff in spending, so it is still too early to call an inflation and interest rate led slowdown.’

However, with the falling market mood after the Federal Reserve’s dovish turn, the ‘Aussie’ could falter as investors turn cautious. The central bank raised interest rates by 75bps and Fed Chair Jerome Powell confirmed in the press conference that the Fed will not be providing any further monetary guidance.

As markets turn risk-averse, safe-haven flows could return, deterring investors from the risk-sensitive Australian Dollar. With global recession fears ever-growing, the ‘Aussie’ could see demand sap.

Pound (GBP) Fluctuates amid Social Unrest and Political Uncertainty

The Pound (GBP) is struggling to find a clear direction today as a lack of major data has pulled domestic woes into focus.

As the UK remains under pressure from the soaring cost-of-living crisis and mounting inflationary pressures, energy suppliers are recording record profits. Shell posted almost £10Bn quarterly profits as British Gas owner Centrica are enjoying £1.3Bn in profits from the first half of 2022. Former Energy UK Chief Angela Knight calls for government to intervene and change tax laws to assist the energy crisis. She adds:

‘There is a big question mark over those making extraordinary profits from an extraordinary world situation.’

Elsewhere, industrial disruption is set to continue through the ‘summer of discontent’ as railway workers have agreed on further walkouts over pay disputes. The UK saw its railway network come to a standstill as 40,000 staff went on strike. Mick Lynch, the Rail, Maritime and Transport (RMT) General Secretary, has called for a general strike after Liz Truss announced she would curb industrial action if she was elected Prime Minister.

Limiting any further gains for the Pound today is growing expectations of a 50bps rate hike at the next Bank of England (BoE) policy meeting. A hawkish turn by the central bank could boost investors’ spirits as they attempt to rein in inflation.

GBP/AUD Exchange Rate Forecast: Global Risk Sentiment to Weigh on the Aussie?

With data thin on the ground for the rest of the day, the Pound Australian Dollar exchange rate will be left to market sentiment. And with a souring market mood, the risk-sensitive ‘Aussie’ could slide.

Meanwhile, the relentless headwinds of both political uncertainty and social unrest will likely continue to weigh on the Pound as inflationary pressures mount.

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