Aussie rebounds against sterling

The Australian dollar rebounded against sterling yesterday, after the disclosure of Britain's financial regulators’ “stress tests” on banks caused renewed jitters in the markets over the health of the UK financial sector.

• The results had many in the market reassessing their views about the UK's banking sector’s ability to cope with a sustained economic downturn.
  
• Sterling was also weighed down by retail sales data, which revealed a bigger than expected fall in sales for April. Retailers are expecting further falls next month.
  
• This is perhaps a reminder that, despite optimism from some areas that the UK economy may be bottoming out, there is almost certainly going to be further weak economic data over the next few months.
  
• At the moment optimism versus economic reality is likely to perpetuate further volatility.