Pound Australian Dollar (GBP/AUD) Exchange Rate Falls as despite Strong UK Labour Market
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate slipped and the pairing is currently trading at an inter-bank rate of AU$1.7719.
On Tuesday morning, data from the Office for National Statistics (ONS) showed that UK wages excluding bonuses rose at the fastest pace in more than a decade.
In the three months to May, wages rose by 3.6% and including bonuses wages jumped by a higher-than-forecast 3.4%.
Commenting on the data, ONS Statistician Matt Hughes said:
‘The labour market continues to be strong. Regular pay is growing at its fastest rate for nearly 11 years in cash terms and its quickest for over three years after taking account of inflation.’
Sterling (GBP) Slides as Labour Market Shows Signs of Weakening
Meanwhile, the UK ILO unemployment rate remained at the multi-decade low of 3.8%.
However, Sterling sentiment was left dampened as there were some signs the labour market was weakening.
Employment growth slowed to a disappointing 28,000 following April’s rise of 32,000.
This was the weakest increase since the three months to August 2018.
Some surveys have suggested that employers are becoming more cautious about hiring at the UK approaches the Halloween Brexit deadline.
Added to this, vacancies slumped to the lowest level in more than a year which weighed on the Pound.
Australian Dollar (AUD) Rises as RBA Ready to Adjust Interest Rates if Needed
On Tuesday the minutes from the Reserve Bank of Australia (RBA) showed the bank’s willingness to move on monetary policy if it is necessary.
The minutes from July’s meeting in which the RBA slashed the official interest rate to a fresh low of 1%, showed the bank was ready to adjust interest rates if it is needed.
The minutes stated:
‘The Board would continue to monitor developments in the labour market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time.
‘Lower interest rates would provide more Australians with jobs and assist with achieving more assured progress towards the inflation target.’
Yesterday: AUD Rises to 10 Day High
Meanwhile, on Monday the Australian Dollar rose to a 10 day high thanks to stronger than expected Chinese data.
The risk-sensitive ‘Aussie’ was buoyed as China’s industrial output rebounded in June from May’s 17-year low.
Added to this, Chinese retail sales jumped to a higher-than-forecast 9.8%.
Commenting on the impact of the data on the ‘Aussie’, Ryan Felsman, Commonwealth Bank of Australia Economist stated:
‘The upside from an Australian perspective is that China – our biggest trading partner – will continue to stimulate its economy to achieve its official annual growth target.
‘The new stimulus measures appear to be working, contributing to stronger readings in June activity data, with investment, production and retail spending all beating market expectations.’
However, further data showed that China’s economic growth slowed to a 27 year low thanks to US-China trade tensions.
Pound Australian Dollar Outlook: Will Better than Expected UK Inflation Buoy GBP?
Looking ahead to the start of Wednesday, it is likely the Australian Dollar (AUD) could slump against Sterling (GBP) following the release of Westpac’s Leading Index.
If June’s index does not rise as high as forecast, it could dampen sentiment in the ‘Aussie’.
Meanwhile, Sterling could receive an upswing of support following the release of the UK Consumer Price Index (CPI).
If inflation remains at the Bank of England’s (BoE) annual target in June, the Pound Sterling Australian Dollar (GBP/AUD) exchange rate could rise.