The Australian Dollar Pound (AUD GBP) exchange rate held relatively steady on Friday as a drop in iron ore prices was balanced out by falling retail sales in the UK.
Australian Dollar Pound (AUD GBP) Weakened by Drop in Iron Ore Prices
The Australian Dollar softened on Friday as prices for Australia’s largest export, iron ore fell below $80 a tonne for the first time this week.
Prices dropped to $79.64 a tonne towards the end of the week’s session as Chinese steel markets began to slow down ahead of the New Year’s celebrations. As Metal Bulletin reported;
‘With the Chinese New Year just a week away, more participants have left the market for an early start to their holiday.’
Prices are expected to fall even further in the coming week as cuts in rebar production are predicted to lower demand for the raw iron needed to produce it, although prices have remained oddly resilient in recent weeks despite the cuts having been first scheduled over six months ago.
Disappointing Retail Sales Weigh on Pound
The Pound was unable to take advantage of the slump in AUD however as the UK’s Retail Sales unexpectedly fell in December.
Domestic sales dropped from 5.7% to 4.3% at the end of 2016, falling considerably short of an expected rise to 7.2% and putting in the worst performance since 2012.
The slump weighed heavily on Sterling as strong consumer spending played a major contributing factor in the growth seen in the UK economy since the ‘Brexit’ vote.
AUD GBP Forecast: Australian Inflation Data Ahead
The AUD GBP exchange rate may rally next week with the release of Australia’s Consumer Price Index as some economists expect the domestic inflation rate to continue to trend higher after it rose from 1% to 1.3% in the third quarter.
Meanwhile the Pound could slip next week as the UK’s GDP data is expected to report that British growth receded in in the fourth quarter as ‘Brexit’ anxieties weighed on the economy.