Pound Australian Dollar (GBP/AUD) Exchange Rate Tumbles Following Slide in Australian Unemployment

August 16, 2018 – Written by John Cameron

The Pound Australian Dollar (GBP/AUD) exchange rate is ticking lower this morning, following the release of Australia’s latest labour report.

Australian Dollar (AUD) Exchange Rates Strengthened by Surprise Fall in Domestic Unemployment

The Australian Dollar (AUD) is trending higher against the Pound (GBP) and many of its other peers this morning as AUD investors welcome a surprise fall in Australia’s unemployment rate.

According to data compiled and published by the Australian Bureau of Statistics (ABS), the domestic unemployment rate unexpectedly fell to 5.3% in July, beating forecasts it would hold at 5.4% and striking an almost six-year low.

This fall in Australia’s jobless rate came despite a surprise fall in employment growth over the same period, as Australia’s work force contracted by 3,900 in July.

However with employment growth being revised up from 50,000 to 58,000 in June, markets appeared more than willing to sweep this dip in growth under the rug.

Paul Dales, Chief Australia & New Zealand Economist at Capital Economics suggested last month’s dip in employment ‘isn’t worth losing sleep over’ adding:

‘Nothing has really changed – jobs growth remains healthy enough and the unemployment rate has continued to edge lower.

‘The 3,900 decline in employment in July isn’t a sign that the economy has suddenly hit the buffers, as the normal volatility of the labour market data means there is occasionally a fall even though the underlying trend is healthy.’

However slightly tempering the ‘Aussie’ gains was a rather gloomy outlook on wage growth, with most analysts agreeing that pay growth in Australia is likely to remain subdued for the time being, preventing a rate hike from the Reserve Bank of Australia (RBA) in the foreseeable future.

UBS’ economics team suggests:

‘Given the RBA thinks that wages need to lift to by around 3.5% to sustain inflation at their 2.5% target, recent data still suggests there is too much slack to generate this outcome in the near-term. Hence, we still see rates on hold until 2020.’

Robust UK Retail Sales Help to Stem Losses in Pound (GBP) Exchange Rates

Meanwhile the Pound (GBP) has managed to stave off some of its losses against the Australian Dollar (ADU) today, thanks to the release of the UK’s latest retail sales figures.

The Office for National Statistics (ONS) reports that UK retail sales jumped by 0.7% last month, rebounding from a 0.5% contraction in June and sailing past forecasts for a more modest rebound to 0.2% growth.

This rebound in sales growth came despite another downturn in footfall on Britain’s high streets, with sales growth in July instead being driven by record online spending as consumers choose to enjoy the sunshine rather that shop in stores.

Rhian Murphy, Senior Statistician at the ONS said:

Many consumers stayed away from some high street stores in July, but online sales were very strong, supported by several retailers launching promotions. Food sales remained robust as people continued to enjoy the World Cup and the sunshine.

GBP/AUD Exchange Rate Forecast: Will a Dovish Speech from Lowe Reserve AUD Gains?

Looking ahead to the tail end of the week, the Pound Australian Dollar (GBP/AUD) exchange rate may mount a recovery depending on the tone stuck by RBA Governor Philip Lowe, in a speech overnight.

This could see the ‘Aussie’ cede much of the ground gained today should Lowe’s outlook appear cautious in light of the ongoing trade tensions between the US and China as well as the recent jitters surrounding Turkey.

Meanwhile the absence of any major UK data could leave the Pound to limp over the finish line on Friday, barring any major developments in Brexit of course.

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TAGS: Pound Australian Dollar Forecasts