Pound Australian Dollar Exchange Rate Nosedives on Bolstered RBA Hikes
The Pound Australian Dollar (GBP/AUD) exchange rate is crashing amid stronger-than-expected Australian Employment Data
At time of writing the GBP/AUD exchange rate is trading around $1.8923, a 0.98% plummet from this morning’s opening levels.
Australian Dollar (AUD) Strengthens on Tight Labour Market
The Australian Dollar (AUD) is finding renewed strength this morning after the latest employment data printed stronger-than-expected.
The jobless rate held steady at 3.5%, coming in better than the 3.6% expected. Employment change also came in better than expected as 32,000 people rejoined the jobs market, far higher than market expectation. With the latest labour market data proving to be persistently tight, the ‘Aussie’ climbed on bullish momentum.
However, preventing further gains is the souring market mood. Aside from the lingering concerns of China struggling with their post-Covid recovery, geopolitical tensions appear to be escalating, weighing further on market sentiment. With the US potentially imposing more curbs on the country’s chip sector, Xie Feng, China’s ambassador to the US, said:
‘The Chinese government cannot simply sit idly by. There’s a Chinese saying that we will not make provocations, but we will not flinch from provocations.’
If China was to react to the restrictions imposed by the US, further geopolitical tensions would sour the market mood further, denting the ‘Aussie’.
Pound (GBP) Under Pressure from Reduced Rate Hike Bets
Meanwhile, the Pound (GBP) is struggling for demand as softer-than-expected inflation significantly pared rate hike bets from the Bank of England (BoE).
Market participants are now expecting the central bank will no longer need to raise interest rates as far to tackle inflation. With inflation appearing to be responding well to the BoE’s interest rate hikes, the central bank can now afford to reassess the situation and think about pausing sooner than expected.
Pound Australian Dollar Forecast: Strong UK Retail Sales to Boost the Pound?
Looking ahead, the Pound Australian Dollar exchange rate could see further movement with the latest retail sales figures from the UK. With an expected increase of 0.2%, it would mark the second consecutive month of sales growth. Sterling could climb on a resilient retail sector.
Meanwhile, the Australian Dollar could see fluctuations through a wavering market sentiment. Amid a lack of economic data, risk appetite will be the biggest driver, and if geopolitical tensions continue to simmer, the risk-sensitive ‘Aussie’ could come under pressure.