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GBP/AUD Slips Lower as Markets Fret Over UK Economic Health

February 19, 2018 - Written by Toni Johnson

The Pound Sterling to Australian Dollar exchange rate has weakened today, as markets continue to fret over last week’s poor UK retail sales figures and what the results could mean for the UK economy.

The GBP/AUD exchange rate has fallen -0.2% to 1.7677, with the Australian Dollar on solid form today even as an advancing US Dollar piles pressure on the commodity-correlated currencies.

Markets remain disappointed by Friday’s UK January retail sales reports, which showed that retail sales excluding auto-fuel grew 0.1% month-on-month instead of the 0.6% expected.

Annualised retail sales rose 1.5%, but forecasts had been for a rise from 1.3% to 2.4%.

All this further weakened the belief that the UK economy has managed to navigate turbulent waters and emerge largely unscathed after the EU referendum, again raising the possibility that surging price growth and a sluggish pace of wage growth is restricting household budgets and slowing vital consumer spending.

Markets are now nervously awaiting Wednesday’s wage growth figures, which could further dampen the outlook for spending unless an acceleration in pay is seen.

AUD Remains on Strong Form as Australia Attempts to Woo US Back into TPP



Australian Prime Minister Malcolm Turnbull will tomorrow arrive in the United States for his first official visit since Donald Trump became President.

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Markets have been cheered by news that the Prime Minister will attempt to persuade Trump to bring the US back into the Trans-Pacific Partnership; a mammoth trade deal that took years to negotiate and nearly collapsed when Trump became President and fulfilled a campaign promise to withdraw from the pact.

However, since then Trump has come under intense political pressure due to his protectionist policies and Turnbull is hoping this can be exploited to bring the US back into the deal; which would have significant benefits for the Australian economy, as the States was the cornerstone of the entire agreement.

Australian Dollar strength comes despite a downbeat prediction from Westpac’s Australian economics team, who have predicted that wage growth will confound the Reserve Bank of Australia’s (RBA) predictions and clock in below-forecast for some time to come.

GBP Forecast to Gain Versus AUD Tomorrow if RBA Meeting Minutes Confirm Cautious Outlook



Tomorrow’s early-morning release of minutes from the Reserve Bank of Australia’s (RBA) recent monetary policy meeting could give GBP/AUD exchange rates a boost.

The RBA maintained its neutral policy bias, with Governor Philip Lowe repeating his usual mantra that the Board will not feel pressured to raise interest rates just because the central banks of other major economies have done, or are preparing to.

While the Federal Reserve, Bank of Canada (BOC), Bank of England (BoE) and European Central Bank (ECB) are all making hawkish noises, the RBA has been firm with its desire to wait until wage growth picks up and unemployment falls before tightening monetary policy.

Governor Philip Lowe has spoken since and doubled-down on this perspective, so tomorrow’s minutes are unlikely to hold any upbeat surprises that could boost the Australian Dollar.

While this dovishness may already be firmly priced-in to AUD and therefore avoid pushing the currency much lower tomorrow, it could open the door to a recovery for GBP after today’s drop.

However, the day’s UK data may not prove supportive; the Confederation of British Industry (CBI) will release its latest total orders and selling prices trends data, with the index for orders expected to have slowed from 14 to 11 during February.

A weaker outlook for the UK’s manufacturers could therefore slow GBP/AUD exchange rate gains, even if the Australian Dollar is on weak form after the minutes are published.
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