Pound Australian Dollar (GBP/AUD) exchange rate strengthens amid strong UK labour report
The Pound Australian Dollar (GBP/AUD) exchange rate is catching bids this morning following the release of a hotter-than-expected UK jobs report.
At the time of writing the GBP/AUD exchange rate is trading at $1.9426, up roughly 0.4% from this morning’s opening rate.
Pound (GBP) firms on upbeat UK jobs data
The Pound (GBP) is rising against the majority of its peers this morning after the UK’s latest jobs data beat expectations.
December’s data reported a surprise drop in unemployment in December, with the jobless rate falling from 3.9% to 3.8%, against forecast it would rise to 4%.
The accompanying wage growth figures also impressed. While average earnings fell from 6.7% to 6.2% this beat expectations it would slow to 6%.
Today’s jobs report has buoyed the Pound this morning, as it helps to undermine expectations for an imminent interest rate cut from the Bank of England (BoE).
Analysts at Nomura predict:
‘Although BoE governor Bailey said that March was live for cuts, we think stronger-than-expected wage growth and a still tightening labour market support the Bank cutting only in August. December’s wage growth was stronger than expected, with upward revisions to the November print. The unemployment rate declined, compared with forecasts for a rise. We think the Bank of England will likely continue to wait for a bit longer before it begins its cutting cycle.’
Australian Dollar (AUD) slumps amid signs of cooling inflation
The Australian Dollar (AUD) is on the back foot this morning following commentary from the Reserve Bank of Australia’s (RBA) Head of Economic Analysis, Marion Kohler.
Kohler acknowledged the ‘welcomed trend’ of easing inflation, explaining that it is ‘still high’, but is coming down ‘at a slightly faster rate’ than what the RBA had previously expected just three months prior.
This is stoking speculation that the RBA could begin cutting interest rates later in the year and is dragging on AUD exchange rates.
Further undermining the risk-sensitive, ‘Aussie’ is this morning’s anxious market mood.
However able to limit the Australian Dollar’s losses are some recent domestic data releases, in the form of the Westpac consumer confidence index and NAB business confidence.
With both sets of data coming in higher than expected, signs of increased business confidence are keeping AUD exchange rates afloat this morning.
GBP/AUD exchange rate forecast: UK inflation to boost the Pound?
Looking ahead, the primary driver of movement for the Pound Australian Dollar exchange rate in the middle of the week will likely be the release of the UK’s latest inflation figures.
An expected rise in inflation may help to dispel rumours of a looming BoE rate cut, in turn bolstering Sterling.
Although any upside in GBP may proved short-lived if Thursday’s GDP figures show the UK slipped into a technical recession in the second half of 2023.
Turning to the Australian Dollar, with data thin on the ground tomorrow market sentiment is likely to drive AUD exchange rates.
Should markets remain cautious, the ‘Aussie’ may continue to lose ground.