- Australian Dollar (AUD) trades lower after retail sales -4.2% MoM
- Victoria state saw largest sales decline owing to lockdown
- Pound (GBP) trades higher after resilient PMI data which showed solid, but slowing growth
- Slowdown could pick up pace after PM tightened restrictions as covid cases rise
The Pound Australian Dollar (GBP/AUD) exchange rate is extending gains for a third day on Wednesday. The pair settled on Tuesday just mildly higher at +0.07% at 1.7749. At 08:15 UTC, GBP/USD trades +0.4% at 1.7820 after hitting a weekly high of 1.7871 overnight.
Demand for the Australian Dollar is slipping across the board following surprisingly weak data. Australian retail sales plunged -4.2% in August compared to the month earlier, with the state of Vitoria seeing the worst decline, amid a second wave of coronavirus.
According to the data from the Australian Bureau of Statistics, Victoria saw large declines in sales across industries except for food as a strict lockdown saw many businesses shut their doors. NOt including Victoria, retail sales across the rest of the country fell a more palatable -1.5%.
Australian PMI data for both the service sector and the manufacturing sector was much more upbeat than expected. With the service sector almost in expansionary territory at 50 on the PMI gauge. Meanwhile activity in the manufacturing sector expanded at a much faster rate than expected at 55.5. Analysts had been predicting that the sector would fall back into contraction.
The Pound was showing resilience after a mixed bag of PMI data. Whilst the manufacturing sector expanded at a faster pace in September, the service sector, the dominant sector in the UK, saw growth ease back slightly from August’s levels.
The composite PMI which tracks activity, slowed to a 3-month low of 55.7 in September, down from a 6 year high of 59.1 in August.
The data shows that the UK economic recovery is losing steam, with both services companies and manufacturing companies reporting slowing new orders. This could in fact worsen over the coming weeks and months after Boris Johnson tightened restrictions in order to stem the spread of coronavirus.