GBP AUD Slips After Australian Retail Sales Rise 

The GBP AUD exchange rate was lower by -0.14% as Australia released new economic data and investors cut positions ahead of the Bank of England rate meeting on Thursday. Retail sales were up by 0.2% in June for Australia, while PMI figures showed expansion in services. 

Markets now await the latest Australia trade balance figures and the BoE policy meeting on Thursday.

The GBP to AUD hovered at 1.7550 as the pound sterling tries to carve out a price bottom.

Aussie dollar boosted by retail sales figures

According to the Australian Bureau of Statistics, retail sales rose 0.2 per cent in June, boosting the Australian dollar.

The figures showed a 12% climb for the year despite a monthly drop from 0.9%.

Like other nations, online sales lag behind physical stores as shoppers embrace the high street after the lockdown era. Clothing, cafes and restaurants saw higher figures, while food, household goods and department store sales dropped. Some of this can be attributed to seasonal travel as Aussies exit the country for holidays.

Quarterly, retail sales climbed by 1.4% to A$94.281 billion, with online sales at A$3.635 billion.

The next issue for Australia will be the US diplomatic visit to Taiwan, which has inflamed relations with China.

The Australian Prime Minister said of the visit:

“We don’t want to see any unilateral change to the status quo, and we’ll continue to work with partners to promote peace and stability across the Taiwan Strait”.

Only a week ago, China looked at new diplomatic relationships with the Albanese government. Still, any regional conflict will see Australia dragged into tensions with its key trading partner. That is a critical risk to the Australian dollar in the coming months. However, such an outcome would also bring the UK into the equation. China warned the UK not to “dance to the tune” of the United States.

Regarding trade, Australia will see its latest trade balance figures for June tomorrow. Markets will look for an improvement on last month’s A$14bn surplus, down from A$16bn in the previous month.

Markets now turn to the Bank of England for guidance

The pound sterling saw a strong rally on Tuesday, and there is potential for a low in the GBPAUD pair.

The following path for the exchange rate will depend on the latest BoE interest rate announcement on Thursday. 

Analysts surveyed by Reuters now expect a rise of 50 basis points in the country’s interest rate as the bank attempts to cool inflation. Last week’s Federal Reserve meeting saw an aggressive 0.75% hike, which will give the UK central bank the green light if they also want to lean to the higher end. 

A 50bps move would take borrowing costs in the UK to 1.75%; the market estimates range from around 2% to 2.9% for the BoE target. 

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