GBP/AUD Exchange Rate Subdued Following UK Jobs Report
The Pound to Australian Dollar (GBP/AUD) exchange rate is struggling to find support this morning in response to the UK’s latest employment figures.
At the time of writing the GBP/AUD exchange rate is trading at around AU$2,0116, virtually unchanged from this morning’s opening rate.
Pound (GBP) Undermined by Rise in Unemployment
The Pound (GBP) is off its best levels this morning as market react to the UK’s latest employment figures.
According to data published by the Office for National Statistics (ONS) the unemployment rate rose from 3.8% to 3.9% in January after the number of people out of work rose by 62,000.
This spooked GBP investors as it comes before the coronavirus crisis began to hit the UK economy, with unemployment expected to accelerate sharply in the months to come as employers are forced to lay-off employees as the outbreak limits demand.
While the accompanying earnings figures beat expectations, with wage growth climbing from 2.9% to 3.1% at the start of the year this was not enough to inspire confidence in GBP investors.
Risk-Off Mood and RBA Minutes Limit Appeal of Australian Dollar (AUD)
Meanwhile, the Australian Dollar (AUD) is once again on the back foot this morning as coronavirus uncertainty leaves markets firmly in a risk-off mood.
Investors are growing increasingly worried that we are facing a global recession as economic activity is increasingly disrupted as governments around the world introduce even more drastic measures in effort to halt the spread of the coronavirus.
Further limiting the appeal of the ‘Aussie’ in overnight trade was the publication of the minutes from the Reserve Bank of Australia’s (RBA) March policy meeting.
This confirmed that the RBA stands ready to take action, but at this time it will likely favour the introduction of stimulus, rather than making another cut to interest rates.
The minutes read:
‘The RBA has argued that cutting cash rates under 0.25% would be counterproductive, but pulling yields down would at least lower borrowing costs across the economy.
‘Minutes of the March meeting showed policy makers were ready and willing to act.’
GBP/AUD Forecast: UK to Announce Fresh Stimulus Plans
Looking ahead, all eyes will be on the UK government this evening as it prepares to announce more financial measures to help limit the economic impact of the coronavirus.
Prime Minister Boris Johnson announced on Monday that unnecessary social contact should be avoided and that people should steer clear of pubs and restaurants.
Given the economic disruption this is likely to cause, the UK government’s previous pledge of £12bn to help cushion the impact of the outbreak now looks to be inadequate in light of recent developments.
Should Chancellor Rishi Sunak announce a significant increase in stimulus then it’s likely we will see the Pound to Australian Dollar (GBP/AUD) exchange rate accelerate.