Pound Australian Dollar (GBP/AUD) Firms as UK Unemployment Rate Stays at 3.7%
The Pound Australian Dollar (GBP/AUD) exchange rate is strengthening modestly this morning amid a continually tight UK labour market.
At time of writing, the GBP/AUD exchange rate is around $1.7482, a 0.26% jump from this morning’s opening levels.
Pound (GBP) Supported by Increased Rate Hike Bets
The Pound (GBP) opened the day with a flurry of jobs data releases. Unemployment remained unchanged for the third consecutive month at 3.7%, in line with expectations. Furthermore, the Office for National Statistics (ONS) reported that the number of people employed rose by 74k in the three months up to December, far exceeding predictions of 40k.
Meanwhile, wages excluding bonuses climbed to 6.7% YoY, the fastest rate on record. But when adjusted for inflation, total pay shrank by 3.1%, whilst regular pay dropped by 2.5%. This was also one for the record books, as it is one of the biggest drops on record. The ONS commented:
‘This is smaller than the record fall in real total pay we saw in February to April 2009 (4.5%), but remains among the largest falls in growth since comparable records began in 2001.’
The resilient labour market could be buoying GBP investors’ moods as a continued tight jobs market indicate domestic inflationary pressures remain high. The Bank of England (BoE) could look on this release to bolster the case for further interest rate increases to bring inflation back down.
Australian Dollar (AUD) Undermined by Falling Consumer Confidence
Meanwhile, the Australian Dollar (AUD) is struggling to find a clear direction as mixed sentiment data painted a mixed picture for the Australian economy.
National Australia Bank’s (NAB) business confidence index jumped considerably to 6 points from three months of rock bottom confidence levels. Confidence picked up after a substantial rise in sales, profitability, and employment. NAB Chief Economist Alan Oster, said:
‘The survey suggests the economy remained resilient to headwinds from inflation and higher interest rates as the year kicked off.’
However, souring the mood somewhat was a substantial decline in consumer confidence. The Westpac consumer confidence index slipped by 6.9%, the weakest level in three months. Soaring living costs and interest rates continue to weigh heavily on consumers.
Pound Australian Dollar Exchange Rate Forecast: Double Digit Inflation to Boost Sterling?
Looking ahead, the Pound Australian Dollar exchange rate could see further movement with the latest release of headline CPI inflation for the UK. Despite an expected modest softening, the rate is likely to remain in double digits, far above the BoE’s target rate of 3%. An expected gradual reduction of inflation is likely to see the central bank continue its rate hiking cycle, buoying GBP investors.
Meanwhile, a speech from Reserve Bank of Australia (RBA) Governor Philip Lowe could boost the ‘Aussie’. If Lowe stands behind the RBA’s hawkish rhetoric on further rate hikes, the Australian Dollar could climb.