Pound Australian dollar (GBP/AUD) exchange rate flat amid souring market mood

Pound Australian dollar (GBP/AUD) exchange rate remains muted as market mood sours

Article updated 15:50, 11/6/2024

The pound Australian dollar (GBP/AUD) exchange rate is remaining level this afternoon, amid a souring market mood.

As markets begin to look ahead to tomorrow’s crop of US data, investors are shying away from riskier assets. This is leaving the pound (GBP) and Australian dollar (AUD) listless.

Tomorrow, the latest US inflation data and Federal Reserve interest rate decision are due. With American inflation looking to be persistent, the Fed is unlikely to cut interest rates, and may even offer hawkish forward guidance.

With this in mind, investors are concerned about how continually restrictive policy in the US could filter through to the global economy.

At the time of writing, GBP/AUD is trading at around AU$1.9271, showing little movement from today’s opening rates.

Original article continues below:

Pound Australian dollar exchange rate static as UK unemployment rate rises

The pound Australian dollar exchange rate is narrowing this morning, following a surprise increase in UK unemployment.

At the time of writing, GBP/AUD is trading at around AU$1.9277, showing minimal movement from today’s opening rates.

Pound (GBP) muted amid rising unemployment

The pound is under pressure this morning, in the wake of the latest UK unemployment data.

Unemployment unexpectedly rose in April, with the rate increasing from March’s print of 4.3% to 4.4%. Furthermore, unemployment specifically rose by 138,000 on a monthly basis, a clear sign of a weakening labour market.

This is bringing UK employment closer to the lows seen during the Covid Pandemic, rather than its pre-pandemic heights.

However, average earnings excluding bonuses held at 6% in the three months preceding April. As a key inflationary pressure, the data is keeping Sterling afloat by indicating that the Bank of England (BoE) may not cut interest rates soon.

Yael Selfin, Chief Economist at KPMG, commented on the data. He stated that:

‘Overall, today’s data are unlikely to warrant an immediate shift in policy from the Bank of England. We expect the MPC to stay put at its June meeting and reassess the incoming data flow over the summer before it embarks on cutting interest rates.’

Australian dollar (AUD) flat amid falling business confidence

The Australian dollar is muted this morning, as investors analyse the latest business confidence data.

In May, sentiment fell back from April’s reading of 2 to -3, amid softening economic conditions. This marked the first negative reading since November 2023.

Cost and price growth measures were found to have reaccelerated in May, which may spark concerns over renewed inflationary pressures.

Alan Oster, Chief Economist at National Australia Bank (NAB), commented:

‘Overall, the message here is a mixed one for the RBA. There are warning signs on the outlook for growth but at the same time reasons to be very wary about the inflation outlook, and we expect the RBA to keep rates on hold for some time yet as they navigate through these contrasting risks.’

As the data is prompting speculation that the Reserve Bank of Australia (RBA) may need to keep interest rates unchanged, AUD is remaining afloat.

Pound Australian dollar exchange rate forecast: UK GDP stall to dent pound?

Looking ahead for the Pound, the core catalyst of movement is likely to be the GDP growth rate for April.

Due tomorrow, economic growth is forecast to have stalled on a monthly basis, which could weaken Sterling. The UK’s economy is still aiming to recover in the wake of a recession, and signs of stagnant activity may spook investors.

For the Australian dollar, Chinese data may be the primary focus for investors in the short term. The latest Chinese inflation data is due to print tomorrow, and is expected to show a 0.4% increase in headline inflation in May.

This could boost the ‘Aussie’ due to its nature as a Chinese proxy-currency. Rising headline rates would show that China is continuing to avoid deflation, which is a promising sign for its economic recovery.

John Mulcahey

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