Pound Australian Dollar (GBP/AUD) Exchange Rate as UK Job Boom Cools
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate rallied and the pairing is currently trading at around AU$1.8661.
Sterling edged up against the Australian Dollar despite data revealing that the UK unemployment rate rose unexpectedly.
The jobs boom cooled ahead of the Halloween Brexit deadline as the number of people in work slumped by 56,000, the largest fall in employment in over four years.
The Office for National Statistics (ONS) revealed that the number of vacancies fell once again, reaching the lowest level since the three months to November 2017.
Commenting on this, Capital Economics’ UK economist, Thomas Pugh noted:
‘This is further evidence that the underlying weakness in economic growth is restraining labour market activity.
‘However, it could also be evidence that the uncertainty around Brexit is starting to impact firms’ hiring decisions. The survey evidence is consistent with a further softening in employment and wage growth going forward too.’
Meanwhile, the ONS showed that in the three months to August, earnings including bonuses rose by an annual rate of 3.8%.
This slowed from 3.9% in July, which saw the strongest increase in wages in over a decade.
However, pay growth is still surpassing inflation which likely provided Sterling with a slight upswing in support.
Australian Dollar (AUD) Slumps as RBA Release October Minutes
The Reserve Bank of Australia’s (RBA) October meeting minutes revealed that the interest rate cut that sent rates to a record low of 0.75%, was highly debated among policymakers.
The minutes also revealed that the main reason for the cut was concerns that unemployment was not low enough to buoy wages and increase inflation.
The minutes stated:
‘Members noted that the bank’s most recent forecasts suggested that the unemployment and inflation outcomes over the following couple of years were likely to be short of the bank’s goals.
‘The most recent run of data had not materially altered this assessment and, on balance, had been on the softer side. The ongoing subdued rate of wages growth also suggested that the economy still had spare capacity.’
The bank also noted calls from analysts to hold back on further cuts in case the global economy deteriorated further and the RBA needed some monetary policy ammunition.
Sterling (GBP) Jumps as Brexit Agreement ‘Still Possible’
The Pound rose against the Australian Dollar on Tuesday as a fresh wave of Brexit optimism buoyed Sterling.
The European Union’s chief Brexit negotiator, Michel Barnier said that he believed an agreement could be reached despite it becoming ‘more difficult’ to reach a deal.
Speaking in Luxembourg on Tuesday morning, Barnier said:
‘An agreement will be more and more difficult but it is still possible this week.
‘Reaching an agreement is still possible, but obviously any agreement must work for everyone – for all of the UK and the whole of the EU. It is high time to turn good intentions into legal text.’
AUD Left Under Pressure on Scarce Details of US-China Deal
The risk-sensitive Australian Dollar was left under pressure on Tuesday as traders questioned if any progress was being made between the US and China trade negotiations.
At the end of last week, markets welcomed the ‘Phase 1’ trade deal that was struck between the US and China, but the lack of details worried traders, causing the ‘Aussie’ to slide.
Commenting on this, senior interest rate strategist at National Australia Bank, Alex Stanley stated:
‘Media reports suggest China wants another high-level meeting later this month to finalise Friday’s agreement, suggesting that not all the details are nailed down.
‘Market participants are conscious that previous US-China ‘agreements’ have subsequently broken down amidst misunderstandings among the two sides.’
Pound Australian Dollar Outlook: Is Further RBA Stimulus Needed to Boost Employment?
Looking ahead to Wednesday, the Pound (GBP) is likely to rise against the Australian Dollar (AUD) following the release of the UK inflation data.
If September’s inflation rises higher than expected and edges closer to the Bank of England’s (BoE) 2% target, it is likely Sterling will rise.
Meanwhile, the ‘Aussie’ is likely to remain under pressure on Thursday morning following the release of September’s Australian unemployment rate.
If unemployment continues to remain high, suggesting further stimulus from the RBA is needed, the Pound Australian Dollar (GBP/AUD) exchange rate is likely to rise.