Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Plummets after Aussie Jobs Data

Australian Dollar (AUD) Exchange Rates Jump as Unemployment Dips to Eight-Year Low

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate plummeted overnight as data released on Thursday showed that Australia’s unemployment rate fell to a lower-than-expected 4.9%.

This was the lowest level in eight years, however the decline was reflective of a dip in the number of people in work rather than a substantial boost in hiring as employment rose by 4,600.

Economists remain divided on whether or not the Reserve Bank of Australia (RBA) will cut rates this year, but this report could tip the balance in favour of leaving rates on hold.

Commenting on this, Marcel Thieliant, Economist at Capital Economics said:

‘The fall in the unemployment rate to an eight-year low in February suggests the RBA will remain [with] its optimistic stance for now, but we still think that the labour market will soon start to slacken again.

‘Our view is that job growth is a lagging indicator and that GDP growth will remain below trend this year as the housing downturn weighs on activity, forcing the Reserve Bank of Australia to cut interest rates.’

Pound Australian Dollar (GBP/AUD) Exchange Rate Extends Losses as Food Stores Suffered Strongest Sales Decline Since December 2016

This morning, the Pound (GBP) extended losses against the Australian Dollar (AUD) and the pairing is currently trading at an inter-bank rate of AU$1.8442.

UK retail sales figures released this morning showed that annual sales growth came in at a higher-than-forecast 4% in February.

Monthly sales rose by 0.4% despite forecasts suggesting a contraction in consumer spending.

However, while sales were stronger than expected they were still considerably weaker than January’s figures.

Commenting on the data release, Head of Retail Sales at the Office for National Statistics (ONS) Rhian Murphy said:

‘Retail sales continued to bounce back in the three months to February with strong increases in fuel sales and online shopping.

‘Food growth slowed, however, due to a significant fall for supermarkets, specialist food and alcohol stores in February after the sales and promotions seen in January came to an end.’

Data also showed that the monthly fall for food stores was the strongest decline since December 2016 which likely weighed on the Pound.

Food sales contracted by -1.5% after a rise of 0.9% in January, with retailers suggesting this slide was due to stores ‘getting back to normal’ after the January sales.

Pound Sterling (GBP) Slips on Brexit Pessimism

The Pound remains under pressure after yesterday’s Brexit inspired losses.

Today sees the start of a two-day European Union summit in Brussels, with Brexit likely to be the main talking point.

UK Prime Minister Theresa May is set to make a plea to the EU leaders for a short extension to Brexit until 30 June.

Wednesday saw European Council President Donald Tusk say that he believed the EU would agree to a short extension.

However, this was on the condition that the Prime Minister’s withdrawal agreement is passed in Parliament after a third ‘meaningful vote’ next week.

With so much still up in the air, the potential for Pound gains looks limited.

Pound Australian Dollar Outlook: Can the GBP/AUD Exchange Rate Claw back Losses after BoE Decision

That being said, the Pound (GBP) may be able to edge higher against the Australian Dollar (AUD) following the release of the Bank of England’s (BoE) interest rate decision and minutes due, at 12:00GMT.

The BoE is largely expected to hold interest rates steady at 0.75%, but if the central bank is optimistic about the UK’s economic outlook the Pound may be able to push slightly higher in spite of Brexit woes.

Millie Empson

Contact Millie Empson