GBP/AUD Exchange Rate Rises on Weak Australian Jobs Report
The Pound Australian Dollar (GBP/AUD) exchange rate is climbing today as Australian unemployment data exceeded forecasts. Unemployment remained at 4% in March 2022, rather than dipping to 3.9% as expected.
At the time of writing, GBP/AUD is trading at A$1.7637, up 0.2% from today’s opening levels.
Australian Dollar (AUD) Tumbles on Employment Data
The Australian Dollar (AUD) is muted against its peers this morning, as Australia’s jobs report missed forecasts, disappointing AUD investors.
The country’s seasonally adjusted unemployment rate stood at 4% in March 2022, unchanged from February’s thirteen-and-a-half-year low and compared with a market consensus of 3.9%: Westpac was the only major bank to predict the 4% jobless rate.
Meanwhile, employment rose 17.9K to a fresh record high but below market forecasts of 40K.
As seasonally adjusted hours worked fell by 0.6%, Bjorn Jarvis, head of labour statistics at the ABS, explained:
‘With floods in New South Wales and Queensland, a higher than usual number of people reported working reduced hours due to bad weather in March. This was in addition to the high number of people away from work due to illness, reflecting further disruption from the Omicron variant.’
The Guardian newspaper notes that the Reserve Bank of Australia (RBA) will be watching today’s figures, as economists tip interest rates will rise soon – most likely from June onwards. However, ANZ economist Catherine Birch says:
‘We think the RBA will wait until June before lifting the cash rate, and today’s data won’t influence the RBA either way. But a big upward surprise in [the first quarter consumer price index] could put May on the table.’
The consumer price index for the March quarter is scheduled for 27 April.
Pound (GBP) Supported by Rate Hike Hopes
The Pound (GBP) has found some support against its peers today, as yesterday’s higher-than-expected inflation reading triggered hopes of another rate hike in May from the Bank of England (BoE).
The UK’s consumer price index rose to 7% in March as the cost of transport skyrocketed: average petrol prices hit 160.2p per litre last month, compared with 123.7 pence per litre a year earlier.
Prices also rose for furniture and household services, clothing and footwear, housing and utilities, restaurants and hotels and food and non-alcoholic beverages.
Inflation is expected to increase further in coming months as the prohibition of Russian oil imports takes effect and trade dynamics shift: one economist predicts the UK CPI will peak at 10% this year.
In light of this, markets are cognisant that the chances of a fourth-rate hike by the BoE have increased. Along with soaring inflation, the UK’s tight labour market will also strengthen the odds of another hike.
According to Thomas Pugh, economist at RSM UK, recent data showing the slackening of wage growth compared with rising consumer prices will ‘make the Monetary Policy Committee even more concerned that the recent burst of high inflation is starting to be reflected in wages, [giving the MPC] all the justification it needs [to raise interest rates again in May].’
Pound Australian Dollar Exchange Rate Forecast: Chinese Data to Affect AUD?
Looking ahead, trading in the UK and Europe is likely to be quiet from tomorrow, as markets celebrate the Easter holiday.
However, Chinese GDP data will be released on Monday, potentially inspiring movement in Australian Dollar exchange rates. If China’s GDP grew in the first quarter of 2022, as expected, the ‘Aussie’ may enjoy tailwinds as a proxy for the Chinese economy.