Rising Australian Unemployment Failed to Boost Pound Australian Dollar (GBP/AUD) Exchange Rate
A mixed bag of Australian labour market data failed to offer any particular support to the Pound to Australian Dollar (GBP/AUD) exchange rate, even though the headline unemployment rate rose.
The unexpected increase in the Australian unemployment rate from 5.5% to 5.6% was not enough to prevent the Australian Dollar (AUD) trending higher on Thursday.
Investors were reassured by the more positive nature of April’s participation rate, with this improvement largely to blame for the increase in unemployment.
With a greater number of Australians now classed as economically active confidence in the outlook of the domestic economy improved, to the benefit of AUD exchange rates.
Even with global geopolitical tensions still mounting this was enough to keep the Australian Dollar on a stronger footing against its rivals.
GBP/AUD Exchange Rate Could Push Higher on Brexit Negotiation Progress
News that the UK government has agreed a backstop in order to avoid the issue of a hard Irish border was not enough to buoy the Pound to Australian Dollar (GBP/AUD) exchange rate for long.
Although the government is reportedly willing to remain within the EU customs union beyond 2021 to maintain frictionless trade across the Irish border this failed to boost Pound (GBP) exchange rates for long.
However, if this concession is enough to move Brexit talks with the EU forward once again then this could help to buoy the Pound more significantly in the days ahead.
Greater volatility looks in store for the GBP/AUD exchange rate next week, though, with the release of the latest UK consumer price index data.
Unless inflationary pressure shows signs of picking up once again the mood towards the Pound is likely to sour, with markets still doubtful over the prospect of the Bank of England (BoE) raising interest rates in the coming months.
Dovish RBA Outlook Forecast to Limit Pound Australian Dollar Exchange Rate Downside
The Pound to Australian Dollar (GBP/AUD) exchange rate could find renewed support if market risk appetite deteriorates once again.
With investors unsettled by the more aggressive and protectionist trade outlook of the Trump administration the appeal of risk-sensitive currencies may come under fresh pressure.
The prospect of increased policy divergence between the Reserve Bank of Australia (RBA) and the Federal Reserve is also likely to limit the upside potential of AUD exchange rates.
Markets see the RBA leaving monetary policy on hold for some time to come thanks to the lacklustre nature of domestic wage growth.
As Bill Evans, Chief Economist at Westpac, noted:
‘There remains the concern that wage pressures may take some time to emerge. Indeed Deputy Governor Debelle highlighted a key risk to the Bank’s outlook in his speech on May 15. He nominated that risk as being that the level of the unemployment rate needed to spark wage and inflation pressures might be lower than the Bank’s current unemployment forecast.’
In the absence of any bullish Australian data the Pound to Australian Dollar (GBP/AUD) exchange rate is likely to recover some of its recent losses.