Pound Australian Dollar (GBP/AUD) Exchange Rate Wobbles as UK Unemployment Climbs

Pound Australian Dollar Exchange Rate Wavers as UK Jobs Market Cools

The Pound Australian Dollar (GBP/AUD) exchange rate is trading erratically this morning as unemployment rises and wages fall.

At time of writing the GBP/AUD exchange rate is trading around $1.7542, relatively unchanged from this morning’s opening levels.

Pound (GBP) Undermined by Rising Unemployment

The Pound is experiencing mixed success this morning in the wake of downbeat employment data. The unemployment rate unexpectedly climbed and real wages continued to fall.

With expectations of an unchanged 3.5%, the unemployment rate came in at 3.6%. Fears of a drawn-out recession are starting to reflect in the jobs market. Yael Selfin, Chief Economist at KPMG UK, warns that the unemployment rate could continue to rise as recessionary pressures take hold:

‘It is only a matter of time before the recessionary environment spills into the labour market as employers increasingly consider the weakening demand and rising labour costs.

‘While the vacancy rate will likely be one of the first indicators to turn, we expect the unemployment rate to eventually peak at around 6% by 2024.’

Meanwhile, wages have jumped higher than expected, but still lagging behind inflation. Pay, including bonuses, climbed by 5.7% from 5.4% in July – September. Despite being the strongest growth in wages since before the pandemic, real wages are still behind inflation.

Further concerning for both the UK economy and the Pound, is the rising number of those not working or looking for work. 21.6% were classified as economically inactive, around nine million people. The figures are considerably higher than before the pandemic.

Australian Dollar (AUD) Fluctuates on Mixed Market Mood

Meanwhile, the Australian Dollar is also struggling to find a clear direction as mixed news out of China weighs on global market sentiment. A lack of major data has left the ‘Aussie’ to trade on external factors as a proxy currency to China.

Reports of easing geopolitical tensions between the US and China are supporting the risk-sensitive ‘Aussie’ as President Joe Biden met with China’s Premier Xi Jinping. Biden promised that there wouldn’t be a ‘new Cold War’ with China. The meeting was the first between the two leaders since Biden took office.

Meanwhile, downbeat economic data out of China weighed on global market sentiment as retail sales fell 0.7% YoY in October. Compounding matters was lower-than-expected industrial production growth. Expectations of a 5.2% increase fell short as the sector only grew by 5%.

Pound Australian Dollar Forecast: UK Inflation to Further Weigh on Sterling?

Looking ahead, the Pound Australian Dollar exchange rate could see further movement with the release of UK CPI data. With expectations of another rise in headline CPI inflation, further rate hike expectations would no doubt bolster Sterling.

Meanwhile, the Australian Dollar could encounter further fluctuations with the wavering market mood. A lack of major data could see the ‘Aussie’ exposed to external influences until the release of employment data on Thursday.

Danny Tingle

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