GBP/AUD Exchange Rate Bolstered by Bearish Sentiment
(Updated 15:30, 14/12/21) After struggling this morning, the Pound Australian Dollar (GBP/AUD) exchange rate appreciated through the latter half of today’s European trading session as investors begin to shy away from risk sensitive assets like the ‘Aussie’.
This comes amidst a mix of Omicron Covid concerns, coupled with a sense of caution ahead of the Federal Reserve’s interest rate decision tomorrow.
Meanwhile, the UK’s upbeat jobs report has extended some support to the Pound, although the upside potential of the GBP/AUD exchange rate remains limited in the face of gloomy UK Covid headlines.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Rangebound on UK Jobs Report
The Pound Australian Dollar (GBP/AUD) exchange rate is stuck in a narrow range so far this morning, as markets respond to the release of the UK’s latest unemployment figures.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8523, virtually unchanged from this morning’s opening levels.
Pound (GBP) Subdued as Robust Jobs Figures Offset by ‘Plan C’ Fears
The Pound (GBP) is off to a slow start this morning, despite the UK’s latest jobs figures showing unemployment in the UK fell to its lowest levels since June 2020.
According to data published by the Office for National Statistics (ONS), unemployment in the UK fell from 4.3% to 4.2% in October, defying suggestions that the end of the government’s furlough scheme could prompt a spike in unemployment.
However, the upbeat figures weren’t enough to buoy the GBP/AUD exchange rate this morning, as analysts warned the drop in unemployment could be swiftly reversed if the government needs to impose stricter ‘Plan C’ restrictions.
Tony Wilson, director at the Institute for Employment Studies, commented:
‘On the face of it, today’s figures are some rare good news for the government, with unemployment now dropping fast towards pre-crisis levels… But beneath the headlines there is plenty here that will be concerning the government and BoE.
‘With the prospect of tighter Covid restrictions in the new year, the government needs to be planning now for more support to help people get back into work as well as to protect those jobs that may be at risk in a Plan C lockdown.’
Further hamstringing the Pound this morning is the expectation that the Bank of England (BoE) will opt to keep interest rates on hold again this month.
While October’s jobs report was previously seen as key barometer for whether or not the bank would hike rates this month, in light of Omicron it seems highly doubtful the BoE will be willing to take the risk.
Australian Dollar (AUD) Muted amid Weak Risk Appetite
At the same time, the Australian Dollar (AUD) is struggling to attract investors this morning as Omicron concerns sees investors shy away from risk-sensitive currency.
Traders remain cautious amidst concerns that the new Covid variant could set back the global economic recovery as countries are forced to implement stricter restrictions.
Further undermining the appeal of the ‘Aussie’ were concerns over a worrying rise in new Covid cases in New South Wales, Australia’s most populous state.
Pound Australian Dollar Forecast: UK Inflation in the Spotlight
Looking ahead, the main catalyst of movement in the Pound Australian Dollar exchange rate in mid-week trade is likely to be the publication of the UK’s consumer price index.
Should domestic inflation have accelerated more than expected last month, there might still be a small chance that the BoE could surprise with a rate hike on Thursday, something which may help to underpin Sterling.
In the meantime, will an improvement in Australian consumer confidence this month, offer some support to the ‘Aussie’ in overnight trade?