The Pound has trended tightly against the Australian Dollar today, in the wake of high-impact UK jobs data as well as warnings about ‘Brexit’ consequences.
The overall performance of the ‘Aussie’ has been uninspiring, likely due to continued concerns about how major trading partner China will fare in the future.
Pound Stages a Recovery after UK Jobs Data, ‘Aussie’ Unsettled by China News
The Pound has managed to make a fractional gain against the Australian Dollar during trading today although, on the whole, investors remain on edge on account of positive news clashing with negative predictions.
On the plus side, the August unemployment rate has remained at 4.9% instead of rising to 5% as forecast, while earnings during the month have also been positive. Less helpfully, however, has been the news that September’s UK claims have jumped instead of falling.
Additionally, the Pound started off trading in a bad way on account of a warning from cabinet ministers that UK GDP could fall and ports could be clogged if the UK loses single market access during ‘Brexit’ negotiations.
Australian Dollar movement has been lacklustre, not due to domestic data – the Westpac leading index rose from 0% to 0.1% in September – but on account of Chinese news.
The Asian superpower has recently posted GDP results for Q3, which have fallen on the quarter but did not fall as expected on the year.
Future Pound Movement Likely to Hinge on Forecasts for ‘Hard’ and ‘Soft Brexit’ Outcomes
Looking to potential future influencers of the Pound, ‘Brexit’ is certainly here to stay, as the latest shifts in sentiment towards the Pound show.
Regarding upcoming movement, any additional warnings that the UK economy could be adversely impacted by a ‘Hard Brexit’ are likely to weaken Sterling. While recent remarks of this nature have focused on UK trade, it is possible that all the promises of the ‘Leave’ referendum campaign will end up being revisited by critics as negotiations progress.
Although this would be a rehash of previous commentary, Pound losses are still likely if focus is directed at mainstream areas such as the NHS, immigration and how the Pound’s value could be affected by the different types of ‘Brexit’ that have been proposed.
Australian Dollar Expected to Move in Line with Chinese Economic Expectations
Outside of direct domestic data, the Australian Dollar could also be shifted in the near and far-term by signs that China is fighting off, or alternatively succumbing to, the threat of an economic slowdown.
Opinions have been mixed on what the future could hold for Australia’s major trading partner; on the optimistic side, ANZ Chief Economist Raymond Yeung has said;
‘China will surely attain the government’s growth target of 6.5-7.0% in 2016…Growth is no longer a major concern, as the property frenzy has topped the government’s agenda’.
More guarded, however, has been Capital Economics China Economist Julian Evans-Pritchard, who has stated that;
‘The recent recovery is ultimately on borrowed time given that it has been driven in large part by faster credit growth and a property-market boom, both of which policymakers are now working to rein in’.
Recent Interbank Exchange Rates
At the time of writing, the Pound Australian Dollar (GBP AUD) exchange rate was trending in the region of 1.60 and the Australian Dollar Pound (AUD GBP) exchange rate was trending in the region of 0.62.
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