Pound Australian Dollar (GBP/AUD) Exchange Rate Fluctuates as Australian Wage Growth Decelerates
The Pound Australian Dollar (GBP/AUD) exchange rate is putting on a muted performance at the moment, trading in the region of AU$1.8224.
The pairing had previously gained following the release of the Australian Wage Price Index, which showed earnings growth decelerated in Q4 2018.
Quarterly wage growth slowed to 0.5%, the lowest quarterly growth since Q1 2018.
Commenting on the recent downside risks facing the Australian economy, Ben Udy from Capital Economics said:
‘Our view is that the housing downturn and weakness in the wider economy will mean that the unemployment rate may rise this year. If we’re right, it’s hard to see wage growth picking up pace anytime soon.’
GBP/AUD Reacts to Brexit Optimism
The Australian Dollar (AUD) was able to hold firm against several of the majors as trade talks between the US and China continued.
Reports emerged that US President Donald Trump may not increase trade tariffs, and when questioned how likely the US was to impose these tariffs on 1 March, Trump responded:
‘I can’t tell you exactly about timing. The date is not a magical date because a lot of things are happening.’
With China being Australia’s largest trading partner, signs of positive progress in talks is proving AUD supportive.
AUD gains against the Pound have been limited however, as Sterling derives underlying support from Brexit speculation.
According to Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank:
‘UK and European officials are working on new legal text for the contentious Irish border backstop.
‘One official said a meeting between Theresa May and European Commission President Jean-Claude Juncker on Wednesday will be ‘significant’. According to this official, an agreed draft could be ready by Thursday. Juncker says he is not expecting major developments.’
GBP/AUD Outlook: Will Steady Unemployment Buoy the Australian Dollar?
Brexit will likely remain the main catalyst for the GBP/AUD exchange rate today.
Later today Prime Minister Theresa May will return to Brussels to continue negotiations with European Commission President Jean-Claude Juncker.
The PM is expected to request legally-binding assurances that the Irish backstop will not be extended indefinitely, although amendments to the Irish backstop issue have been consistently shut down by the EU.
The start of the session tomorrow could see the Australian Dollar buoyed following the release of January’s Australian employment rate stats.
If the unemployment rate remains steady and Australia adds a decent number of positions, the Australian Dollar could firm.
Any further developments in the US-China trade discussions will also influence movement in the risk-sensitive AUD.
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