Pound Australian Dollar exchange rate dips amid cooling UK employment
The Pound Australian Dollar (GBP/AUD) exchange rate extends its recent losses this morning amid disappointing UK jobs data and Australian economic pessimism.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9335, down approximately 0.2% from this morning’s opening rate.
Pound (GBP) falls amid cooling UK labour market
The Pound (GBP) faces headwinds this morning amid a disappointing batch of UK jobs data.
Unemployment across Britain marginally rose to 3.9% in January, surpassing market expectations that it would hold at 3.8%.
The report comes alongside observations from the Institute for Employment, wherein analysts have expressed concerns of prolonged softening in the labour market, as the UK economy continues to create jobs, despite almost a million vacancies remaining unfilled.
Analysts observe that such significant gaps in the labour market could serve to stifle economic recovery, perpetuating a pre-pandemic cycle of stagnation.
Additionally, average earnings (excluding bonuses) in January’s three-month average unexpectedly slumped to 6.1%, falling to the slowest growth since October 2022.
Amid easing UK wage growth, markets appear to be dialling up their Bank of England (BoE) interest rate cut speculations, as expectations of further wage cooling opens the door to monetary loosening in the coming months.
Paul Dales, Chief UK Economist at Capital Economics, said:
‘There are encouraging signs that a more marked slowdown is just around the corner and that an interest rate cut in June is possible.’
In turn, GBP is left on the defensive today, ahead of further market moving releases, due tomorrow.
Australian Dollar (AUD) wavers amid economic pessimism
The Australian Dollar retreated overnight, despite a smaller-than-anticipated dip in the latest NAB business confidence index.
The survey reported that confidence fell to 0 in February, down from a reading of 1 in the previous month, though missing forecasts of -1. Despite narrowly averting a slump into negative territory, the flat reading underpinned recent concerns that cost pressures remain a significant hurdle.
Driving February’s lacklustre reading were continually high borrowing costs and elevated inflation, alongside a major drag in the retail sector. Meanwhile, improving business conditions and strengthening employment prevented a significant decline in last month’s survey.
Alan Oster, Chief Economist at NAB said:
‘The softness in these more forward-looking indicators says that firms really are still quite concerned about the outlook for the economy in the near-term. Confidence remains quite weak, as do forward orders, with retail a long way underwater on both fronts.’
Amid renewed concerns about the trajectory of the Australian economy, AUD could struggle to find a clear direction today between a mixed market mood and investor reluctance.
Pound Australian Dollar exchange rate forecast: GBP to lift Sterling?
Coming up, the UK’s latest GDP data is due for release tomorrow morning. A forecast return to growth in January could boost the Pound, with economists expecting a 0.1% rise.
Following confirmation that the UK economy fell into a technical recession last winter, after two consecutive quarters of negative growth, an economic rebound entering into 2024 could see GBP rally. Amid quietened concerns about the health of the UK economy, waning rate cut bets may lift Sterling sentiment.
Looking to Australia, a lack of notable data until the end of the week could see the ‘Aussie’ susceptible to market volatility. The highly risk-sensitive currency will likely stumble under gloomy trading conditions.
However, an increasing appetite for risk could see UAD take precedent over the majority of its peers.