GBP/USD: Pound Sinks Lower With Low UK Retail Sales
  • UK retail sales jump 13.9% mom in June vs 8% exp.
  • Weaker consumer confidence points to weaker retail sales ahead
  • Australian Dollar (AUD) under pressure as China announces closure of US consulate in Chengdu
  • Fears grow over the stability of the Phase 1 trade deal

The Pound Australian Dollar (GBP/AUD) exchange is extending gains for a second session. The pair settled on Thursday +0.6% at 1.7951. At 07:15 UTC, GBP/AUD trades +0.2% at 1.7980. This is at the top end of the daily traded range.

The Pound is surging higher as UK retail sales continued to bounce back in June following the reopening of shops. According to the Office of National Statistics retail sales surged 13.9% month on month in June, adding to a 12% jump in May.

There were a number of factors which supported strong sales, these included pent up demand, good weather, the easing of lockdown conditions and the government’s furlough scheme still running at full steam. These factors are expected to ease in the coming months. Perhaps most importantly the government’s job retention scheme, is set to ease. Concerns over the end of this scheme were evident in weak consumer confidence in July.

According to GFK British consume confidence remained soft in July at -27 as investors fret over the ending of the government’s jobs support programme. Currently the government is paying the wages of 9 million workers. As from August this will start to taper with employers expected to start contributing. Job losses are expected.

Investors will now look ahead to UK PMI data. Analysts forecast growth I both the service sector and the manufacturing sector. Strong readings could boost the Pound further.

The Australian Dollar is trading on the back foot as US – Sino tensions dominate. China has ordered the closure of the US consulate in Chengdu in retaliation for Trump closing the Chinese consulate in Houston. Fears are growing that the Phase 1 trade deal is under threat as relations sour between the two powers. The Australian Dollar is a proxy for China.

Australian domestic data was mixed with the service sector PMI showing strong growth in the sector. Activity int he manufacturing sector expanded but by less than forecast.