GBP/EUR, GBP/AUD Exchange Rates Higher After UK and EU Data, Australian Trade Deficit Widens
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GBP/EUR, GBP/AUD Exchange Rates Higher After UK and EU Data, Australian Trade Deficit Widens

05 January 2018 by FC Exchange

Exchange rate experts FC Exchange discuss why the pound has risen against the euro (GBP/EUR) and the Australian dollar (GBP/AUD) after UK shop price data, Eurozone inflation numbers, and Australian trade balance data.

The pound spent Friday morning in a tight range against the euro (GBP/EUR) and slightly higher against the Aussie (GBP/AUD) as economic data hit the market. The British Retail Consortium’s (BRC) shop price index contracted further in December on the year, declining from -0.1% to -0.6%. Shop prices fell further into deflationary territory on account of sales and discounts retailers offered on non-food products, and came as the most extensive fall since March. Meanwhile, food prices soared, rising by 1.8% in December.

BRC Chief Helen Dickson commented on the findings, saying: ‘This is good news for shoppers. Retailers offered lower prices at the beginning of December than last year on many of their non-food ranges, providing welcome options for Christmas shoppers on a stretched budget… While retailers will continue to do their best to absorb cost increases for their customers, the challenges to the industry remain stark with more inflationary pressures in the pipeline.’

Additionally, the latest Federation of Small Businesses (FSB) quarterly survey has shown that a record amount of small businesses are preparing to close or be sold as they struggle under rising inflation and a lack of customers. Small businesses are becoming increasingly pessimistic with 31% of SME’s believing that Q1 2018 will see conditions deteriorate.

Meanwhile, in the Eurozone, the latest currency bloc consumer price index (CPI) fell in December’s flash reading, from 1.5% to 1.4%, slipping further away from the central bank’s 2.0% target.

Australia also had some bad news on Friday when its trade balance expanded to its largest in over a year, at -$628 million in November. The huge contraction is thought to be a result of weaker exports for products such as coal and grain and an upswing in imports. Forecasts had suggested that a surplus as high as +$800 million could be attained, and even pessimistic predictions had been for a flat reading.

The result was a surprise to markets after a number of consecutive surplus readings since September. Economist Ryan Felsman said: ‘Back-to-back trade deficits are surprising given decent increases in most of Australia’s commodity and services exports, and rising commodity prices amid a strengthening global economic backdrop.’

The pound to euro (GBP/EUR) exchange rate is currently trending in the region of 1.1237. The pound to Australian dollar (GBP/AUD) exchange rate is residing at levels of 1.7267.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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