Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Muted as Coronavirus Hits Aussie Labour Market
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate remained flat this morning, leaving the pairing trading at around AU$1.8958.
The Australian Dollar edged lower today as data revealed Australia shed jobs at the fastest pace on record in April.
Aussie Prime Minister Scott Morrison warned that the country should brace for more bad news as job losses jumped a record high due to the coronavirus crisis.
The labour market statistics provided a clear illustration of the pandemic’s effect on the Australian economy. Growth had experienced an unbroken run of expansion for more than two decades.
In a televised media briefing, Prime Minister Morrison said:
‘This is a tough day for Australia, a very tough day. Terribly shocking, although not unexpected.’
Data revealed 594,300 jobs were lost in April, causing the unemployment rate to jump to 6.2% from 5.2% in March. This was the highest since September 2015.
While the rate is lower than the forecast 8.3%, this was largely due to a large decline in the number of people looking for work. This including some who are receiving an emergency ‘jobseeker’ payment from the government.
The country’s statistics office stated that if these were included in the figures, unemployment would jump to 9.6%. This would have been the highest since 1997.
According to the Commonwealth Bank of Australia’s chief economist, Craig James:
‘The terms ‘unprecedented’ and ‘extraordinary’ are used regularly to describe the effects of COVID-19 on the economy but when discussing the impact on the job market, the terms are appropriate.’
Sterling (GBP) Flat as UK in Midst of Recession
The Pound also remained under pressure and even slumped below $1.22 against the US Dollar (USD). This was the lowest level in more than five weeks due to weak British economic data and a stronger USD.
Wednesday’s data revealed the British economy shrank by a record -5.8% in March as the coronavirus pandemic hit.
Added to this, growth plummeted -2% in the first three months of 2020, the largest fall since the depths of the financial crisis in 2008.
Meanwhile, British Finance Minister Rishi Sunak stated the country was in the midst of a recession. Speaking after the release of the UK’s growth data, Sunak said:
‘We have to support people’s jobs, their incomes, livelihoods at this time, and support businesses so we can get through this period of severe disruption and emerge stronger on the other side.’
Risk appetite remained under pressure this week as many countries including the United States began easing coronavirus restrictions.
Investors remain cautious as the restrictions to allow factories and shops to re-open present the significant risk of a second wave of coronavirus infections.
Added to this, a fully-fledged global economic recovery is likely to be far off until a vaccine for the virus is available. This weighed on both the ‘Aussie’ and Pound, leaving GBP/AUD muted.
Pound Australian Dollar Outlook: Will Risk Appetite Continue to Fall?
Looking ahead, weak risk appetite could continue to weigh on both the Pound (GBP) and Australian Dollar (AUD).
However, traders will be awaiting China’s industrial production, retail sales, and investment data to measure how quickly the second-largest economy is recovering after GDP contracted in the first quarter for the first time in decades.
If Friday’s data is more upbeat than expected, it will offer the risk-sensitive ‘Aussie’ support.
Weak data could continue to weigh on the Pound. This could send the Pound Australian Dollar (GBP/AUD) exchange rate lower.