GBP/AUD Exchange Rate Firms amid Tight UK Labour Market
The Pound Australian Dollar (GBP/AUD) exchange rate is climbing despite UK employment data printing softer than expected.
At time of writing the GBP/AUD exchange rate is around $1.8740, a 0.30% jump from this morning’s opening rate.
Pound (GBP) Supported by Further Employment Growth
The Pound (GBP) managed to hold onto gains despite softer-than-expected employment data. With unemployment unexpectedly edging higher, and regular pay growth exhibiting less-than-expected growth, Sterling maintained its strength against some of its peers.
Evidence of the labour market cooling was apparent in the latest employment data from the Office for National Statistics (ONS) revealed that the number of workers has fallen for the first time in two years. With a stuttering economy, the unemployment rate edged higher to 3.9% against expectations of an unchanged 3.8%. Between March and April, 136,000 employees left the workforce. Darren Morgan, ONS Director of Economic Statistics, commented:
‘Employment and unemployment both rose again in the first three months of 2023, driven in particular by men. This means the number of those neither working nor looking for work continues to fall, although the number of people not working due to long-term sickness rose again, to a new record.’
Looking ahead, a speech from Bank of England (BoE) Governor Andrew Bailey is set to speak tomorrow. In the wake of softer-than-expected labour market data, a maintained dovish rhetoric could soften Sterling.
Australian Dollar (AUD) Undermined by Downbeat Chinese Data
Meanwhile, the Australian Dollar (AUD) is struggling for demand as global sentiment dipped after poor economic data from China.
The world’s second largest economy in China is showing further signs that the rebound after relaxing strict Covid measures was short-lived. Industrial production and retail sales disappointed to the downside, whereas a modest improvement in unemployment prevented further losses.
Further weighing on the ‘Aussie’ was the latest Reserve Bank of Australia (RBA) minutes released overnight. The central bank opted to hike at its May meeting, but considered a pause if it wasn’t for persistent inflation risks. Another pause could be on the horizon, potentially sapping demand for the Australian Dollar. The minutes said:
‘In weighing up the two options, members recognised that the arguments were finely balanced but judged it appropriate to increase interest rates at his meeting.
‘Members also agreed that further increases in interest rates may still be required, but that this would depend on how the economy and inflation evolve.’
Looking ahead, the ‘Aussie’ could see fluctuations with the latest labour market data. An expected slowdown in employment growth, and an unchanged unemployment rate could make the RBA’s job more difficult. Signs of a cooling labour market could allow another pause, but if data prints to forecast, that decision could become tricky.
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