Smaller Rise in Australian Unemployment Pushes Pound Australian Dollar (GBP/AUD) Exchange Rate Lower
As March’s Australian unemployment rate saw a smaller uptick than forecast the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate weakened.
While forecasts had pointed towards the unemployment rate rising to 5.5% it instead clocked in at 5.2%, suggesting that the Covid-19 outbreak has had a less severe impact on the labour market.
This encouraged the Australian Dollar (AUD) to push higher against many of the majors on Thursday, even as the general sense of market risk appetite remained muted.
Although the latest US jobless claims data showed another sharp increase on the week this was not enough to lift the GBP/AUD exchange rate out of its fresh slump.
Even with the global economy looking set to face further disruption from the pandemic as a number of countries extend their lockdowns the Australian Dollar was able to hold onto a positive footing.
Sharp Decline in Chinese Growth Set to Drag on Australian Dollar
AUD exchange rates could come under renewed pressure on the back of the first quarter Chinese gross domestic product, however.
With the growth rate expected to show a sharp -9.9% contraction on the month this looks set to dent market sentiment, to the detriment of the Australian Dollar.
If the slowdown proves deeper than forecast this could drag the Australian Dollar down across the board, given that the currency commonly functions as a proxy for sentiment towards the Chinese economy.
On the other hand, a better-than-expected growth reading could help the antipodean currency to gain fresh ground.
As long as markets see signs that the world’s second largest economy could bounce back from its Covid-19-driven slump sooner rather than later AUD exchange rates are likely to find support.
BoE’s Warning over Covid-19 Economic Impact Weighs on Pound Sterling
Comments from Bank of England (BoE) policymaker Silvana Tenreyro put Pound Sterling (GBP) under pressure, meanwhile.
As Tenreyro noted that the UK economy faces an ‘extremely large hit’ from the Covid-19 crisis this added to existing worries over the economic outlook, weighing down GBP exchange rates.
This cautious outlook encouraged speculation that the central bank could engage in further monetary loosening in the months ahead.
Confidence in the underlying health of the UK economy could weaken further on the back of Tuesday’s claimant count change data.
If March saw a sharp increase in jobless claims this would add to expectations of a major decline in economic activity, diminishing the appeal of the Pound.
Unless the labour market can demonstrate greater resilience in the face of the lockdown the GBP/AUD exchange rate looks set to extend its downtrend.