Pound Australian Dollar (GBP/AUD) Exchange Rate Drops from 3-Day High

Pound Australian Dollar (GBP/AUD) Exchange Rate Softens on AU Data

The Pound Australian Dollar (GBP/AUD) exchange rate weakened overnight as Australian employment data was released during the Asian session. Unemployment dropped unexpectedly from 3.7% to 3.6%, buoying the Australian Dollar (AUD) against the Pound (GBP).

At the time of writing, GBP/AUD is trading at A$1.9200: higher in the past 24 hours but subdued from this morning’s opening levels.

Pound (GBP) Falters on Quiet Day of Trade

The Pound is tumbling today against several of its peers, as a lack of UK data leaves the currency exposed to headwinds.

Following yesterday’s surprise inflation data, the Sterling rally has run out of steam. Despite the UK’s higher-than-forecast CPI readings – both headline and core – investors are still uncertain regarding the Bank of England (BoE)’s likely forward guidance.

Analyses were mixed yesterday, with experts at both ING bank and Capital Economics speculating that price pressures alone were unlikely to guarantee hawkish policy tightening measures. Economist Paul Dales remarked:

‘Together with a more gradual easing in core inflation and wage growth, [the conflict in the Middle East] supports our view that the bank won’t cut interest rates until late next year.’

Further headwinds pressuring GBP stem from a risk-off mood amid escalating geopolitical tensions. The conflict in the Middle East between Israel and Palestinian terrorist group Hamas shows no sign of abating despite international efforts to intervene: the UK Prime Minister Rishi Sunak joined his American counterpart Joe Biden in Israel this morning to encourage an end to the violence.

The Telegraph recorded Mr Sunak as saying: ‘Every civilian death is a tragedy. And too many lives have been lost following Hamas’s horrific act of terror.’

Australian Dollar (AUD) Trades Mixed on Employment Data

The Australian Dollar is consolidating gains against the Pound today but is subdued in other exchange rates as tailwinds following a hawkish speech from the Reserve Bank of Australia (RBA) fade.

Australia’s employment release, published during this morning’s Asian session, printed mixed – with unemployment trending unexpectedly lower but fewer jobs added to the economy than had been forecast.

Employment change for the month of the September came in at 6.7K – well below the 20K predicted; elsewhere, the country’s participation rate eased slightly rather than holding steady at 67%. Initially the ‘Aussie’ fell in response to the data but corrected somewhat on positive analyses from Australian officials.

Katie Lamb of the Australian Bureau of Statistics (ABS) explained that ‘The fall in the unemployment rate in September mainly reflected a higher proportion of people moving from being unemployed to not being in the labour force’; subsequently, the data was greeted with upbeat comments from Australian treasurer, Jim Chalmers.

‘This is the most jobs created in the first term of any government on record, and we’re only halfway through the term,’ said Chalmers.

Capping gains for the Australian Dollar elsewhere is souring market sentiment given geopolitical tensions. As with the Pound, AUD struggles to attract support during times of risk aversion.

GBP/AUD Exchange Rate Forecast: External Factors to Define Movement?

The Pound Australian Dollar exchange rate is likely to trade on external factors for the remainder of today’s session, given a lack of further significant data from both the UK and Australia.

The situation in Israel will undoubtedly remain in focus, alongside any indications of policy stance from central bank officials. If BoE policymakers are able to provide a clearer picture of the UK’s economic outlook, GBP could climb.

Into tomorrow, British retail sales will be in the spotlight. Sales are forecast to have fallen in September; if the data prints as expected, the Pound is likely to relinquish prior gains.

Olivia Evershed

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