GBP/AUD Exchange Rate Weakens on Mixed UK Employment Data
The Pound Australian Dollar (GBP/AUD) exchange rate hit a fresh monthly low this morning as the Pound (GBP) is subdued by mixed employment data. Meanwhile, the Australian Dollar (AUD) enjoys bullish momentum following the release of the Reserve Bank of Australia (RBA)’s July meeting minutes.
At the time of writing, GBP/AUD is trading at A$1.7434, down 0.6% from today’s opening levels.
Pound (GBP) Wavers on Uneven Jobs Report
The Pound is encountering downside against several of its peers this morning as a mixed jobs report weighs upon the currency.
While April’s employment change figures showed that the economy added 296,000 jobs as opposed to the 170,000 expected, average earnings (incl. bonuses) fell by more than forecast and the measure of pay rolled employees printed lower than predicted.
Regular pay growth (excl. bonuses) edged up to 4.3% from 4.2% as expected – but real pay, adjusted for inflation, fell to a new record low. Laith Khalaf, head of investment analysis at AJ Bell, observes:
‘There is a stark comparison between private sector wages, which rose by 7.2%, and public sector pay, which went up just 1.5%.
It seems the government is exercising pay restraint in the face of runaway inflation, but the private sector is not.’
Khalaf worries that if this trend continues, pay rises in the private sector could serve to entrench inflation while minimal increases to public sector pay will continue to stoke industrial tensions.
Meanwhile, new chancellor of the exchequer Nadhim Zahawi has given a speech intended to reassure workers:
‘We’re working alongside the Bank of England to bear down on inflation, providing support worth £37bn this financial year for the cost of living, and investing in skills to help people get into work and progress.’
Australian Dollar (AUD) Shrugs Off Chinese Covid Headwinds
The Australian Dollar is firming against its rival currencies so far today as the RBA’s meeting minutes were revealed to be hawkish in tone. The July minutes demonstrate a consensus among policymakers that further interest rate hikes will be required to return inflation to target.
News from China revealed that 699 new coronavirus cases were identified on Monday – the highest daily figure since 22 May. As the city of Lanzhou ordered a lockdown from Wednesday and Shanghai widened its mass-testing program, global risk sentiment weakened.
Nevertheless, AUD shook off headwinds and continues to climb. Comments from the RBA’s minutes specified that members were considering either a 25 or 50bps rate hike at the next meeting, and that inflation is forecast to peak later this year then decline to the 2-3% range in 2023.
The RBA’s deputy governor Michele Bullock spoke at an event by the Economic Society of Australia during the Asian session. Her remarks tallied with those of the RBA minutes:
‘Further rate increases will be needed in the months ahead… Risks will be important in deciding size and timing of future interest rate rises. [These] will be influenced by the future path of employment growth.’
GBP/AUD Exchange Rate Forecast: BoE Speech to Influence Trading?
Later today, a speech from the Bank of England (BoE)’s Governor Andrew Bailey could affect Sterling exchange rates. Chancellor Zahawi will also address the event: markets will likely be attentive to hints as to whether the BoE will hike by 25 or 50bps at its next meeting.
Elsewhere, a further vote in the UK’s political leadership contest should whittle down the number of prime ministerial candidates to three. As the country comes closer to the appointment of a new leader, GBP may enjoy associated tailwinds.