Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks as Australian Employment Data Improves

January 23, 2020 – Written by John Cameron

GBP/AUD Exchange Rate Rangebound, RBA Rate Cut Odds Ease

The Pound Australian Dollar (GBP/AUD) exchange rate fell by -0.5% today, with the pairing currently trading around AU$ 1.9102 after December’s Australian unemployment rate fell to a better-than-expected 5.1%, ending last year on a positive note.

Gareth Aird, an Economist at CBA, was mixed in his response, however, commenting:

‘The unemployment rate is now on a very gentle downward trend despite GDP growth running well below trend. Unemployment usually rises when the economy is running below trend.’

‘Bottom line, we have removed the February [Reserve Bank of Australia] rate cut in our forecasts and pushed it back to April.’

Today also saw the release of December’s Australian employment change figure which beat forecasts and rose to 28.9 thousand. With the labour market being in particular focus for the RBA, improving jobs reports are boosting the likelihood that the central bank will hold its interest rates early this year.

‘Aussie’ investors are remaining cautious, however, as tensions between the US and China have been uncertain since last week’s signing of the ‘phase one’ trade deal. And as China is Australia’s largest trading partner, any further flare-ups could weaken the risk-averse Australian Dollar.

GBP/AUD Exchange Rate Sinks as Brexit Uncertainty Haunts UK Markets

The Pound (GBP) has remained subdued against many of its peers today, with no UK economic data due to be released until tomorrow.

Brexit uncertainty, meanwhile, has returned after Stefaan De Rynck, a top advisor to Michel Barnier, the European Union’s chief Brexit negotiator, urged a ‘dose of realism’ to UK-EU trade discussions.

This follows shortly after comments made by Chancellor Sajid Javid, who said that the UK would diverge from EU regulations after the 31st January, when the UK is officially expected to have left the European Union.

Today also saw the Brexit bill gain royal assent, leaving many Sterling traders remaining jittery as the UK’s economic future still remains uncertain with just a week to go until the UK’s withdrawal.

GBP/AUD Outlook: Could the Pound Rise on an Improving UK Services Sector?

Pound (GBP) traders will be awaiting tomorrow’s release of the UK Markit Services PMI report for January, which is expected to rise from 50 to 51. As a result, we could see the GBP/AUD exchange rate rise as the UK’s largest economic sector improves and lowers the odds of a rate cut from the Bank of England (BoE) later this month.

Tomorrow will also see the release of the flash UK Markit Manufacturing PMI, which is, however, expected to remain mired in contraction territory. If it falls below consensus, however, this could sway the BoE’s interest rate decision as the British industrial sector continues to suffer.

US-China trade developments will continue to drive the GBP/AUD exchange rate for the rest of this week. Any further flare-ups between the world’s two largest economies would weigh on risk-appetite for the risk-sensitive Australian Dollar.

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TAGS: Australian Dollar Forecasts Pound Australian Dollar Forecasts