GBP/EUR UK Retail Sales Soar Despite Consumers Being Squeezed
  • Pound (GBP) under pressure as post Brexit trade talks break down, ending a day earlier than planned
  • UK service sector PMI shows sector contracted at a slower rate
  • Australian Dollar (AUD) cheers stronger than forecast retail sales and upbeat Chinese data
  • Pound Australian Dollar exchange rate (GBP/AUD) trades -0.2% at 1.7955

The Australian Dollar is extending gains for a second straight session on Friday following upbeat retail sales data. Australian retail sales saw a record surge in May as strict lockdown measures were gradually eased allowing entire sectors of the Australian economy to reopen.

Retail sales jumped +16.9% in May an impressive bounce back after sales tumbled -17.9% in April. The strong rebound in sales indicates that consumer spending won’t be as weak as initially feared in the second quarter of the year. The data is boosting hopes that the Australian economy will be able to recovery quickly from its first recession in 30 years.

Stronger than forecast Chinese service sector data is also boosting the Aussie Dollar, which is often referred to as a proxy for China. The Chinese service sector grew at the fastest rate in three decades, boosting hopes that the economic recovery in the world’s second largest economy is on track, after economic paralyse caused by the coronavirus lockdown earlier in the year.

The Caixin/ Markit service sector PMI rose to 58.4 in June, up from 55 and comfortably ahead of 53.2 expected. The level 50 separates expansion from contraction.

Looking ahead there is no high impacting Australian data due for release, meaning that the risk sensitive Aussie Dollar will be driven by sentiment across the remainder of the session.

The Pound is under pressure, despite the UK service sector contracting at a marginally slower pace than initially forecast. The IHS/Markit service sector PMI printed at 47.1, up from 47 as the sector continues to recover.

Brexit headlines are dragging on demand for the Pound after negotiations between the EU and UK broke down and ended a day early. Talks will still go-ahead next week in London as planned. However, the early end this week and lack of progress, highlights the distance that still remains between the two sides.