GBP/AUD Exchange Rate Firms as UK Unemployment Drops
The Pound Australian Dollar (GBP/AUD) exchange rate is climbing today as impressive UK employment figures boost the Pound (GBP). Meanwhile, the Australian Dollar (AUD) is also enjoying tailwinds on account of hawkish meeting minutes from the Reserve Bank of Australia (RBA).
At the time of writing, GBP/AUD is trading at A$1.7763, up 0.5% from today’s opening levels.
Pound (GBP) Gains as Employment Rises
The Pound is supported today by the publication of better-than-expected jobs data, which revealed that unemployment fell to 3.7% in March, while average earnings increased by 7% (including bonuses).
Although the number of people without employment decreased by only 0.1%, it marked the lowest unemployment level since 1974; for the first time since records began, there were also fewer unemployed people than job vacancies, which reached a new record of 1.295 million.
Analysts suggest the UK’s cost-of-living-crisis may be forcing the unemployed to seek out work at record levels.
Real wage growth for regular pay was 1.9% lower than a year ago in March, but still exceeded expectations; wages in the private sector rose by 8.2% and in the public sector by 1.6%.
UK Chancellor Rishi Sunak said in response to the data:
‘The unprecedented support we provided through our Plan for Jobs has led to the jobs market remaining robust despite global challenges… it’s reassuring that fewer people are out of work than was previously feared.’
Today’s data helped Sterling pull back recent losses versus the strong US Dollar (USD), as GBP/USD approached $1.2670; GBP also rose by a cent against the Euro (EUR) to €1.19.
Australian Dollar (AUD) Buoyed by Predominantly Optimistic Meeting Minutes
The Australian Dollar found support against its peers this morning following the release of the RBA’s latest meeting minutes and continues to climb against several on subsequent tailwinds.
The minutes struck a measured tone, warning that a further decline in real wages is likely as prices continue to increase more rapidly than wages; but remained optimistic overall and concluded that the Australian economy is being supported by household and business balance sheets.
RBA officials also suggested the significant increase in commodity prices would see the terms of trade peak later and at a higher level than previously assumed, boosting national income.
Moreover, records disclosed that policymakers considered raising interest rates by 40 basis points earlier this month, causing markets to speculate whether June may yield a higher rate hike.
CBA’s Belinda Allen affirms: ‘The mere discussion of a 40-basis-point move means it cannot be ruled out, particularly if, once again, data surprises on the upside.’
David Plank, ANZ’s head of Australian economics, concurs.
‘We think an upward surprise of 1 per cent quarter-on-quarter growth in tomorrow’s Wage Price Index (WPI) could be enough to get the RBA over the line for 40 basis points,’ he noted.
Pound Australian Dollar Exchange Rate Forecast: UK Inflation to Drive Further Movement?
Looking ahead, tomorrow’s UK consumer price index is expected to print at 9.1% – more than 7% higher than the Bank of England (BoE)’s target rate.
If inflation prints at – or higher than – expected, the UK’s central bank will come under pressure to tighten monetary policy at a faster pace, potentially inspiring downside in light of weaker-than-expected economic growth.