Pound Australian Dollar (GBP/AUD) Exchange Rate Dips on Fragile UK Economy

Pound Australian Dollar (GBP/AUD) Exchange Rate Weakens, AU Data Impresses

The Pound Australian Dollar (GBP/AUD) exchange rate has fallen today as Australian employment data surprised to the upside. Meanwhile, a lack of significant UK data leaves the Pound (GBP) to trade on fears of a recession.

At the time of writing, GBP/AUD is trading at A$1.9268, almost a full percentage point below opening levels.

Australian Dollar (AUD) Buoyed as AU Economy Adds almost 65K Jobs

The Australian Dollar (AUD) is enjoying a boost today as the economy added 64.9 thousand jobs in August – far beyond expectations of 23,000.

Part-time employment jumped to a record high of 4,258,100, and full-time employment increased by 2,800: over the course of the year, employment grew by 3%. Economists are hopeful that the data may signal avoidance of a hard landing.

Treasurer Jim Chalmers welcomed the August jobs figures as ‘a tremendous result and a testament to the resilience of the Australian economy and the Australian people’, reflecting today’s positive mood; not all assessments were so upbeat, however.

The surge in employment may lead to a more hawkish policy move from the Reserve Bank of Australia (RBA), which has triggered worries that household and business costs will continue escalate.

Before employment figures were released, it was assumed that the RBA would keep interest rates on hold indefinitely.

Following the data, Michael Malakellis, KPMG senior economist said: ‘Today’s data shows that further RBA rate rises in the coming months cannot be completely discounted. A key to this is whether the tightness in the labour market continues to put upward pressure on wages.’

Forecasts predict that higher interest rates will eventually push unemployment higher, as employers’ hiring budgets contract.

Pound (GBP) Pressured by Signs of Economic Weakness

The Pound is struggling against the majority of its peers today, subdued by economic headwinds as financial strain weighs upon household budgets.

According to new statistics from the Office for National Statistics (ONS), a growing number of UK households missed direct debit payments last month. The number of missed bill payments was 14% higher in August than a year ago, the ONS reported.

Direct debit payments are used for utility bills and credit card repayments – expenses which have become insurmountable for some households.

Today’s news compounds headwinds following yesterday’s GDP data, which showed that Britain’s economy contracted by more than forecast in July. The 0.5% decline marked the largest shrinkage so far in 2023 – analysts at the ONS blamed industrial action and poor weather.

Following strike action across multiple sectors, average earnings in the UK increased according to Monday’s data – while positive news for employees, this outcome sparked fears of a wage-inflation spiral, as UK inflationary pressures remain high.

GBP/AUD Exchange Rate Forecast: Chinese Data to Influence AUD?

Looking ahead, tomorrow’s Chinese retail data could affect the Pound Australian Dollar exchange rate given the close trading relationship between Australia and China.

If Chinese sales increased as forecast by 3% in the year to August, the indication of recovery in the world’s second-largest economy may lend additional tailwinds to risk-off currencies. On the other hand, unemployment is also expected to have increased last month, potentially capping gains.

The jobless rate already rose in July to 5.3% from June’s 16-month low. If it ticks up once more, Chinese headwinds could subdue AUD rates, subsequently boosting GBP/AUD.

Olivia Evershed

Contact Olivia Evershed

Do Not Sell My Personal Information