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Pound Australian Dollar (GBP/AUD) Exchange Rate Weakness Forecast on Tighter Australian Labour Market

Australian Dollar Currency Forecast

Pound Australian Dollar (GBP/AUD) Exchange Rate Recovers Ground in Spite of Rising Australian Sales

A moderate uptick in Australian credit card purchases was not enough to prevent the Pound to Australian Dollar (GBP/AUD) exchange rate recovering ground at the start of the week.

Market disappointment surrounding the Bank of England’s (BoE) less hawkish policy outlook largely faded over the weekend, offering the Pound (GBP) a chance to rally.

Even in the absence of any fresh domestic data GBP exchange rates pushed higher on Monday morning, with investors encouraged to buy back into the weakened Pound once again.

Lingering global geopolitical risk, meanwhile, helped to limit the appeal of the commodity-correlated Australian Dollar (AUD).

Tightening Australian Labour Market Forecast to Weigh on GBP/AUD Exchange Rate

The Pound to Australian Dollar (GBP/AUD) exchange rate is likely to extend its rebound further ahead of Thursday’s Australian labour market data.

While forecasts point towards a steady unemployment rate the number of employed Australians is thought to have picked up on the month.

Signs of a tightening labour market would give the Australian Dollar fresh cause for confidence, even though the jobs report is notoriously volatile in nature.

Focus will also fall on May’s consumer inflation expectation figure, which may point towards a further increase in price pressures over the coming months.

Even so, this is not likely to materially alter the policy outlook of the Reserve Bank of Australia (RBA) at this stage.

As analysts at Rabobank noted:

‘Q1 CPI registered a softer than expected 1.9% y/y, below the RBA’s 2%-3% policy target band. Although there is evidence in the inflation breakdown that core inflation is ticking higher, barring a significant increase in wage inflation, it seems likely that the RBA will remain patient on policy. Signs of a slowdown in the housing market provide further reason for the RBA to remain cautious in the coming months.’

Pound Australian Dollar (GBP/AUD) Exchange Rate Looks for Support on UK Wage Data

Confidence in the UK outlook could improve on the back of the latest UK employment and wage data, meanwhile, to the benefit of the Pound to Australian Dollar (GBP/AUD) exchange rate.

If wage growth is found to have accelerated in the three months to March this could give the BoE greater cause for optimism, given that sluggish wages have been cited as a concern by policymakers.

On the other hand, any slowdown in average weekly earnings could weigh heavily on GBP exchange rates.

Even if the UK labour market continues to tighten investors are likely to be concerned if wages do not see a corresponding boost.

Unless wages pick up consumer spending looks set to remain somewhat muted, leaving GBP exchange rates exposed to fresh downside pressure.

Worries over Brexit are also forecast to keep the Pound to Australian Dollar (GBP/AUD) exchange rate on a generally weaker footing for the foreseeable future.