GBP AUD Pauses After a Recent Bounce Higher 

The GBP AUD exchange rate was flat on Thursday as traders paused the recent economic data. The pound sterling bounced for three days from recent lows, but some headwinds are forcing traders to scale back their bullish bets for now. The Australian government cut its growth expectations in the budget, but there are still promising signs for the Aussie economy. 

The GBP to AUD rate was trading at 1.7380 after finding support at the 1.7200 level. 

Australian retail sales momentum hits the buffers

Australian retail sales slowed down more quickly than expected last month. Economists blamed the decline on higher inflation and interest rates.  

Retail sales turnover was higher by 0.2% in June, at a record $34.2 billion, for a sixth straight month of gains. However, the pace slowed to the worst this year. Analysts expected a rise of 0.5% for the Australian retail industry. Like the previous UK figures, the country also saw a sharp increase in overseas travel. 

Sean Langcake, the macroeconomic forecaster at BIS Oxford Economics, said the latest data highlighted a “marked slowing in momentum compared to the strong run of sales over 2022”. “Considering how strong price inflation for retail goods was in Q2, this is quite a soft print and implies volumes growth was likely negative in the June quarter,” Mr Langcake added. 

The travel numbers indicated 20% more Australian departures than arrivals in June, up from only a 1% gap in May. 

Australian growth outlook cut, the deficit still drops

Australia’s new government released its budget statements on Thursday, cutting its growth outlook. 

Speaking to parliament, Treasurer Jim Chalmers slashed the economic growth outlook by half a percentage point for the fiscal year and next. Mr Chalmers also predicted inflation would peak at 7.75% rather than the 4.25% forecast by the previous government in March. 

Despite the weaker growth outlook, Australia’s budget deficit would be far lower than forecast, thanks to the higher prices in commodity markets, which make up Australia’s chief exports. Unemployment is also in good shape, with a 48-year low of 3.5% in the unemployment rate. Rising interest rates already weigh on the property market in Australia, with price declines in the hot spots of Sydney and Melbourne, which could take its toll on the economic outlook.  

“Our high inflation is primarily, but not exclusively, global. It will subside but not overnight,” Chalmers said. “Left untreated, inflation which is too high for too long undermines living standards in jobs and wrecks the economy. But the medicine is also tough to take — and millions of Australians with a mortgage are feeling that pain right now.” 

In the UK, there is talk of extended industrial action after the business secretary threatened a crackdown over rail strikes. The Labour party also sacked its shadow transport secretary for joining a picket line in a move set to inflame the situation further. 

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