Pound Australian Dollar (GBP/AUD) Exchange Rate Stumbles on Upbeat Australian Jobs Report
The Pound Australian Dollar (GBP/AUD) exchange rate is on the defensive this morning, following the publication of an upbeat jobs report from Australia.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8831, down roughly 0.2% from this morning’s opening levels.
Australian Dollar (AUD) Buoyed as Sharp Drop in Unemployment Fuels RBA Rate Hike Speculation
The Australian Dollar (AUD) is trending higher against the Pound (GBP) and the majority of its other peers this morning in response to a stellar domestic jobs report.
According to data published by the Australian Bureau of Statistics (ABS), the unemployment rate fell from 4.6% to a 13-year low of 4.2% in December after adding 64,800 new jobs. This was a significantly stronger than the 4.5% forecast by markets.
The stronger-than-expected jobs report caused at least one bank to bring forward its expectations for the next interest rate hike from the Reserve Bank of Australia (RBA), something which is helping to underpin the ‘Aussie’ this morning. Westpac bank is now penciling in the next hike for August, having previously forecast it would not come until February 2023.
In a briefing note published this morning, Westpac said:
‘We are more optimistic about the unemployment rate than the [RBA’s] latest forecasts.
‘The [RBA] Board would probably view around 4% as full employment – an objective the Bank does not expect to achieve until end 2023 but which we expect by June 2022.’
However, the Australian Dollar has been forced to shed some of these gains at the start of today’s European trading session as rising US Treasury yields and geopolitical tensions dents market risk appetite.
Pound (GBP) Buoyed by Cooling Political Jitters
At the same time, the Pound (GBP) is holding its ground this morning amidst suggestions some of the pressure on Prime Minister Boris Johnson has been lifted after a number of Conservative MPs reportedly rescinded their letters of no confidence in the PM.
While there are still some doubts over the future of his premiership, particularly ahead of Sue Gray’s report on lockdown breaking parties at Downing Street, GBP investors appear relieved the immediate threat of a leadership challenge has passed.
Also buoying Sterling sentiment is optimism over the UK’s economic recovery after Boris Johnson announced nearly all remaining Covid restrictions will be lifted in England from next week.
Pound Australian Dollar Forecast: Underwhelming UK Retail Sales to Drag on Sterling?
Looking ahead to the end of this week’s session, the Pound Australian Dollar exchange rate may face additional headwinds with the publication of the UK’s latest retail sales release.
December’s figures are expected to report sales growth contracted 0.6% as the emergence of Omicron is thought to have significantly undermined consumer confidence. This will be down from a 1.4% expansion in November and is likely exert some pressure on the Pound.
Meanwhile, with AUD data releases thin on the ground for the remainder of the week, the direction of the Australian Dollar is likely to be primarily driven by market sentiment. Could a rebound in the US Dollar (USD) sap the appeal of the ‘Aussie’.