Pound Australian dollar (GBP/AUD) exchange rate dips lower amid upbeat trade
(Article updated 16:30, 18/07/2024) The pound Australian dollar (GBP/AUD) exchange rate is edging lower this afternoon, as an increasing appetite for risk and ramped-up Bank of England (BoE) interest rate cut bets drive movement.
The acutely risk-sensitive Australian dollar (AUD) is attracting some investor support as the session nears an end, as a spell of cheery trade permeates global markets.
Elsewhere, the UK’s latest employment data continues to weigh on the pound (GBP), as markets speculate over whether the BoE is likely to reduce interest rates next month.
Rob Wood, Chief UK Economist at Pantheon Macroeconomics commented:
‘Rate setters will breathe a sigh of relief after today’s labour market data, which leaves open the option to cut in August despite hot CPI services inflation. Rate setters will be encouraged by softer private sector pay growth in May, suggesting only small upside risks to their forecast for Q2 pay growth. We think an August rate cut is a very close call.’
Looking ahead, could a sharp decline in UK retail activity see GBP extend the day’s losses tomorrow morning?
At the time of writing, GBP/AUD is trading at around AU$1.9279, down 0.3% from the morning’s opening levels.
Original article continues below:
Pound Australian dollar exchange rate dips amid easing UK wages
The Pound Australian dollar (GBP/AUD) exchange rate is falling this morning following the latest UK and Australian jobs data.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9286, down approximately 0.2% from this morning’s opening rate.
Pound (GBP) slumps as UK wage growth cools
The pound (GBP) is retreating from its recent highs this morning following the latest batch of UK jobs data.
While unemployment remained unchanged, close to a three-year high of at 4.4%, average earnings declined as forecast.
Average earnings (excluding bonuses) cooled to 5.7% in the three months up to May 2024, falling from a previous reading of 6%. Signs that stubborn wage growth in the UK is beginning to cool has seen a slight increase in Bank of England (BoE) interest rate cut expectations this morning, with markets still split between August and September for the central bank’s first rate reduction of the year.
This has put an end to Sterling’s recent rally, which was fuelled by yesterday’s hotter-than-forecast UK inflation data.
However, some economists have argued that recently cooling wage growth may not be enough to offset the UK’s continually strong services inflation, which came in at 5.7% yesterday.
Ashley Webb, UK Economist at Capital Economics, said:
‘We have changed our forecast for the timing of the first interest rate cut from 5.25% from August to September, although it is a close call.
But we think the cumulative effect of weak GDP growth last year and some improvement in supply this year will mean that services inflation falls from 5.7% in June to 3.5% in early 2025 and wage growth slows to 3% by the end of next year.’
Australian dollar (AUD) edges higher despite mixed jobs data
The Australian dollar is posting some modest gains this morning following the release of the latest AU jobs data overnight.
AUD initially slipped following a slight increase in domestic unemployment, which unexpectedly rose to 4.1% in June. However, a slight increase to 66.9% in Australia’s labour force participation rate cushioned AUD’s losses. This suggested that despite signs of marginal loosening during the second quarter, Australia’s labour market remains tight, leaving the Reserve Bank of Australia (RBA) with additional scope to maintain a restrictive stance towards its monetary policy.
Ben Udy, Australia’s Lead Economist at Oxford University, said:
‘Even though the unemployment market ticked up, the labour market remains really tight – a rise in employment of 50,000 is a really strong result and the fact that the strength was focused in full-time employment meant the underemployment rate actually ticks down a little bit.’
Elsewhere, an increasingly upbeat market sentiment lends the acutely risk-sensitive ‘Aussie’ some additional support this morning.
Pound Australian dollar exchange rate forecast: UK retail sales in focus
Looking ahead, the UK’s latest retail data is due for release tomorrow. Forecast to have contracted by 0.4% in June, falling consumer activity could weigh on Sterling.
Looking to Australia, a lack of notable releases may leave AUD vulnerable to global risk dynamics, with any bullish trade likely to lift the ‘Aussie’.