Pound Australian Dollar Exchange Rate Rebounds as Risk-Off Mood Persists
(Updated 16:10, 14/07/2022) The Pound Australian Dollar (GBP/AUD) exchange rate rebounded from this morning’s low levels today, as weak market sentiment subdued the ‘Aussie’ against the less risk-sensitive Pound.
Although Sterling lacked significant UK data as trading stimuli, the currency was supported by progress in the UK’s contest for a new Prime Minister – the number of candidates remaining has fallen from six to five as Suella Braverman was knocked out of the running.
Meanwhile, the Australian Dollar retained some upside following the release of this morning’s upbeat employment data, but tailwinds were capped as a slew of risk-off data was released throughout the session. Equities fell, oil prices tumbled on recession fears and US jobless claims hit an 8-month high – indicating that firms may have cut staff to save money.
Towards the end of European trading, GBP/AUD began to resume a downward trajectory once more.
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GBP/AUD Exchange Rate Approaches Fortnightly Low
The Pound Australian Dollar (GBP/AUD) exchange rate is trading down this morning as Australia’s employment data surprised to the upside. Meanwhile, the Pound (GBP) is subdued by a downbeat report from the IMF.
At the time of writing, GBP/AUD is trading at A$1.7563, down 0.3% from today’s opening levels.
Pound (GBP) Trades Mixed as IMF Warns of Recession Risks
The Pound is encountering downside pressure today on both risk-off headwinds and downbeat analyses from the International Monetary Fund (IMF).
The head of the IMF warned this morning that the outlook for the global economy has ‘darkened significantly’ in recent months as the commodity price shock off the back of the war in Ukraine exacerbated living costs.
Kristalina Georgieva said:
‘The outlook remains extremely uncertain. Think of how further disruption in the natural gas supply to Europe could plunge many economies into recession and trigger a global energy crisis.’
In the UK, rising living costs are exemplified by average private rent prices having hit record highs.
The average rent advertised outside London is 11.8% higher than a year ago, with London rent prices up 15.8% according to property agent Rightmove.
According to the Guardian:
‘The rise in housing costs is piling more pressure on households already feeling the strain of the cost of living crisis and has been largely blamed on demand for rental properties greatly outstripping supply.’
Australian Dollar (AUD) Buoyed by Upbeat Employment Data
The Australian Dollar (AUD) is firming against its peers this morning, buoyed by better-than expected employment data.
Australia’s June unemployment rate dropped by more than forecast to 3.5%, setting a fresh record low since the Australian Bureau of Statistics (ABS) jobs release became monthly in 1978.
Meanwhile, the economy added 88,400 new jobs as opposed to the 30 thousand predicted – marking the eighth straight month of rising employment in the country.
The combined unemployment and employment change figures mean that even with more jobseekers in June, the ratio of unemployed people to vacant positions decreased, equating to one unemployed person per job vacancy.
According to ABS head of labour statistics, Bjorn Jarvis, this is compared with three times as many unemployed people per vacancy before the pandemic.
‘The labour market is now tighter than the RBA expected at any point in 2022,’ remarks BIS Oxford Economics analyst Sean Langcake, ‘which presents upside risk to wage and inflation forecasts.
In light of today’s strong data, we expect the RBA will raise rates by 50 basis points at the August meeting.’
Other analysts believe the Reserve Bank of Australia (RBA) may hike by as much as 75bps.
GBP/AUD Exchange Rate Forecast: Chinese Data to Sway Australian Dollar?
Looking ahead, a lack of significant UK or Australian data tomorrow leaves the Pound Australian Dollar exchange rate to trade on external factors.
While Sterling may be influenced by political dynamics and the ongoing commentary regarding the possibility of a recession, the ‘Aussie’ is likely to be affected by Chinese data. As a proxy for the Chinese economy, AUD tends to climb when China prints positive growth figures.
Tomorrow, China’s GDP growth rate is expected to be revealed as 1% for Q2 2022, with industrial production printing at 4.1% from 0.7% last month. If the data prints as expected, GBP/AUD could slump again.