The AUDGBP exchange rate was 0.25% lower on Wednesday after the release of the latest retail sales figures in Australia came in worse than expected. The country saw one of the strongest rebounds in the world economy, but fresh lockdowns have hit the Aussie dollar and the economy is seeing a slowdown.
The AUD to GBP pair trades at 0.5363 and saw new lows for the year at the 0.5350 level.
Aussie retail sales and dollar suffer
The Australian dollar suffered again on Wednesday after the release of retail sales for June. The preliminary number was expected to come in at -0.5% but missed by a large amount at -1.8%.
The numbers are disappointing as economies had built up large amounts of savings but the recent lockdowns are keeping consumers at home, while many prefer to hold onto those savings.
Retail turnover figures for June posted the biggest drop this year, according to the Australian Bureau of Statistics (ABS) and that will be a negative for Q3 GDP figures later.
“We expect retail sales to fall again in July as the Sydney lockdown intensifies, another Melbourne lockdown starts, and South Australia also falls into lockdown,” ANZ economists wrote.
“As the risks of a long Sydney lockdown increase, so do the risks of a muted recovery, particularly since fiscal support is not as strong as it was during the long Melbourne lockdown in 2020.”
Analysts had been looking for the RBA to taper stimulus measures soon but the latest lockdowns are a bailout for the central banks’ 2024 rate hike trajectory.
Economists are predicting that Australia’s A$2 trillion economy will shrink in the third quarter, which would mark the first contraction since June 2020. The slowdown in demand is already being seen in weekly consumer confidence readings, with the latest report showing a 5.2% drop.
Virus worsens in Australia, but UK also at risk
The virus situation worsened in Australia on Wednesday with both Victoria state and Sydney reporting sharp increases in new cases despite more than half the country’s population remaining under stay-at-home orders.
In the UK, the situation is also bad with virus cases topping 44,000 on Wednesday and warnings that lockdown restrictions could return.
The UK’s Chief Medical Officer, Chris Whitty, has warned that England could be back in lockdown restrictions within five weeks if cases continue to surge during the third wave.
Hospitalisations are doubling almost every three weeks and they could hit “quite scary numbers,” according to Whitty. England saw all legal virus restrictions lifted on Monday, but cases are rising sharply. Worryingly for the country’s plans for herd immunity, the latest figures have seen 60% of the new hospital admissions already having two doses of the virus vaccine and it’s looking like the latest variant is evading the vaccine.
The AUDGBP has been under heavy pressure in the last two weeks with only two positive days out of eleven trading sessions.