Sterling suffers against AUD (Daniel Johnson)

Poor inflation and poor Retail Sales data could push back BOE rate hike

We have seen very positive news from the UK of late. We have had UK unemployment come in at a 43yr low, a rise in average wage growth and previous retail sales figures came in at 0.8%, well above the expected 0.4%.

We have also recently had news that a Brexit transitional deal has all but been agreed, with the UK having access to the single market until full exit.

GBP/AUD moved as high as the 1.84s. We have seen the Pound take losses over the last few days however. It first took a hit following a fall in inflation pushing away the probability of a rate hike from the Bank of England (BOE) in May. Inflation has now fallen below average wage growth which some may deem as positive, but if people are making more money and not spending it, it does not bode well for the UK economy.

Yesterday there was a sharp fall in retail sales. There was predicted to be a drop from 0.8% to – 0.5%, but they landed at a shocking – 1.2%. The markets remained muted, which surprised me as this surely brings into question a rate hike in May. There was little Sterling weakness.

It was a dovish speech from the Head of the BOE, Mark Carney to convince investors the hike could be put off until later in the year. The pound weakened as a result.

Despite this I still feel the Aussie is fragile. With no hikes planned by the Reserve Bank of Australia (RBA) this year and the US dollar proving to be far more attractive to investors due to higher returns and safe haven status I am not convinced we will see GBP/AUD drop below 1.81. If I was an Australian Dollar seller buying the pound I would take advantage of current levels. Aussie Buyers aim for the 1.84s, 1.85 is proving to be a firm resistance point.

If you have a large currency transfer to perform in the coming days, weeks or months then I will be happy to speak to you directly as I will be willing to help you both with trying to time a transaction and getting you the best possible rate when you do come to trade. A small improvement in a rate of exchange can make a significant difference so for the sake of taking a few minutes to email me you may find you save yourself hundreds if not thousands of Pounds. You can contact me (Daniel Johnson) on dcj@currencies.co.uk and I will endeavor to get back to you as quickly as possible. Thank you for reading.

 

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