Pound Australian Dollar Exchange Rate Crashes Lower Amidst Poor Sterling Sentiment
(Updated 16:20, 12/04/2022) The Pound Australian Dollar (GBP/AUD) exchange rate has plummeted this afternoon to 0.9% below opening levels, as further reports reveal the toll of the income squeeze on a society struck by record inflationary pressures.
According to Reuters, British employees with the smallest monthly pay packets are receiving the lowest annual salary rises, intensifying the cost-of-living squeeze for the poorest households.
An employee who earns less than 90% of other employees in Britain saw their average monthly pay packet rise by just 0.6% in the three months to the end of February, while pay for the median employee rose by 6% and that for the top 1% of employees – who make at least £168K a year rose by 8.4%.
This data tallies with a survey commissioned by recruitment website Indeed last week: for workers earning between £10,000 and £24,999, the average pay rise was 3.3%, whereas for those earning £150,000 or more, the average rise was 5.4%.
As a result of the uneven distribution of wage pressures, there has been an increase in the number of poorer shoppers who say they are skipping meals more often, including pensioners, the unemployed, and causal and low-skilled manual workers.
Original article continues below:
GBP/AUD Exchange Rate Softens on Upbeat Australian Data
The Pound Australian Dollar (GBP/AUD) exchange rate has fallen this morning following the release of better-than-expected Australian business confidence data; weak UK employment data also exerted downside pressure as the number of people in work missed expectations and UK wages fell in real terms.
At the time of writing, GBP/AUD is trading at A$1.7514, down 0.3% from today’s opening levels.
Australian Dollar (AUD) Regains Strength on Business Confidence
The Australian Dollar (AUD) has firmed so far today as the National Australia Bank (NAB)’s business confidence index surprised to the upside.
The index increased to a five month-high of 16 in March 2022 with little evidence of any adverse impact from events in Ukraine; confidence rose sharply in transport, construction, and recreation and personal services, while business conditions staged the largest one-month jump since June 2020.
According to NAB Chief economist Alan Oster, the rebound was driven by strong consumer demand, as the retail sector saw conditions rise 23pts.
Oster commented: ‘A surge in business conditions headlined a really strong March survey. Businesses reported very strong trading conditions and a sharp rise in profitability, which indicates demand is continuing to hold up as the economy rebounds from Omicron and growth gathers momentum.’
Looking ahead, economists indicate that the escalation in price growth over recent months suggests a strong Q1 CPI reading is likely and based on the monthly trend could well continue to build in Q2.
If this is the case, bullish momentum surrounding the Reserve Bank of Australia (RBA)’s predicted outlook will most likely persist, despite concerns that markets’ rate hike expectations may be overdone.
Pound (GBP) Weakens Following Mixed Employment Data
The Pound (GBP) is experiencing some downside this morning, following the release of employment data from earlier this year.
While February’s unemployment rate decreased marginally as expected, with average earnings increasing by 5.4%, January’s employment change figures revealed that the number of people in work in the UK increased by only 10K rather than the 50K forecast.
The Office for National Statistics (ONS) reported that while there are over half a million more UK workers on company payrolls than before the pandemic, total employment is still 558K lower than in February 2020 due to the drop in self-employment.
Furthermore, basic pay is ‘falling noticeably in real terms’ as the UK’s wage squeeze continues. Regular pay, which excludes bonuses, only rose 4% over the last 12 months, meaning that real regular pay packets shrank by 1% once you adjust for inflation.
Ben Harrison, director of the Work Foundation think tank, says today’s jobs report shows the need for more government help for struggling households:
‘Crucially, workers and job seekers are being hit by the largest fall in living standards on record as inflation outpaces wage growth.
The Chancellor’s Spring Statement failed to provide economic security to the most vulnerable in society… [he] must return to despatch box and, at a minimum, raise Universal Credit in line with predicted inflation.’
Pound Australian Dollar Exchange Rate Forecast: UK Inflation to Decide Further Movement?
Looking ahead, UK inflation data will be released tomorrow and is likely to influence the trading direction of the Pound Australian Dollar exchange rate.
The consumer price index is expected to have reached 6.7% in March, potentially buoying Sterling if investors interpret that the Bank of England (BoE) is subsequently more likely to tighten its monetary policy.
Meanwhile, China’s trade balance may affect ‘Aussie’ exchange rates tomorrow – if the country’s surplus falls to $22.4bn as forecast, AUD could come under pressure.