Currency News

Daily Exchange Rate Forecasts & Currency News

Pound to Australian Dollar Exchange Rate Forecast: UK Employment Lifts Sterling and GBP/AUD Today

August 16, 2017 - Written by Toni Johnson

The Pound to Australian Dollar exchange rate has reversed losses seen earlier today to trade 0.21 per cent higher on Thursday 17th August, quoted at 1.62841 into evening trade.

This move comes despite many analysts seeing further Aussie strength in the near-term.

Manuel Oliveri of Credit Agricole said "Higher-yielders such as the AUD have become increasingly sensitive to risk sentiment and therefore we consider further upside cannot be ruled out in the weeks to come, for instance against lower-yielders such as the CHF."

Yesterday's trade saw the British pound valued in the region of A$1.6384 Aussie dollars, putting the rate near the lowest level since late July.

GBP Declines against AUD despite Overall Support from Jobs Data



The Pound has fallen against the Australian Dollar today, but the latest UK data has exceeded forecasts on all counts.

This has covered the labour market in June and July; jobless claims have fallen in July, while unemployment has dropped to 4.4% in June. Further good news has been that average earnings have climbed above forecasts in June.

While wage growth did move higher, however, the pace of earnings increases remains below the inflation rate (2.6% in July).

Advertisement
This domestic data has given commentators plenty to talk about. While the overall news has seemingly been positive, Ann Francke of the Charter Management Institute has warned of low productivity;

‘It should be a real cause for concern that the UK’s productivity has fallen again, especially considering we still lag well behind our G7 peers in this area. It’s becoming increasingly clear that decisive action is needed if we are to end this downward trend.

Most people still don’t realise that the largest drag on productivity is poor management and leadership skills, estimated to account for almost half of the productivity gap. Investing in apprenticeships to boost management talent, as well as technical skills, is therefore vital’.


Keeping wages in focus, Kathleen Brooks of City Index has speculated on possible wage growth in the future;

‘There are signs that wage pressure could start to build. If you dig a bit deeper into the ONS data then you find that employment levels made another record high, the employment rate is at 75.1%. There has been a drop of 157,000 unemployed people in the UK in the last year, and the number of economically inactive people has also fallen by 90,000 in the past year.

Although 883,000 people remain on “zero-hours” contracts, this has fallen by 20,000 in the past year. Although this is a fairly small decline, if more firms stop hiring people on zero hours contracts then we could see wage growth start to rise on a sustained basis’.


Tying this news in with the chances of a Bank of England (BoE) interest rate hike was Hargreaves Lansdown Senior Economist Ben Brettel;

‘Conventional economic theory suggests that with unemployment as low as it is, sooner or later demand for labour will outstrip supply and workers will be able to demand higher wages. However a fundamental shift in the labour market has led this relationship to break down, meaning wages remain depressed despite low unemployment’.


Brettel cites the ongoing problem of a flooded labour market as the reason for low unemployment but low wage growth as well;

‘The cause seems to be a lack of underlying inflationary pressure, combined with technological developments and global competition which has weakened the bargaining power of the worker. Throw continuing lacklustre productivity growth into the mix too, and the Bank of England’s prediction of 3% wage growth by next year could look optimistic.

All this has implications for interest rates. If unemployment can fall further without causing wage inflation, there is absolutely no pressure on the Bank of England to raise rates.


AUD Holds Fast ahead of Fed Minutes



On the other side of the exchange rate, the Australian Dollar has advanced against the Pound, despite domestic data being somewhat unsupportive.

In Australian news, wage growth has been problematic, averaging under 2% year-on-year in the second quarter.

Highlighting the problem at hand, ASB Chief Economist Bruce Hockman stated that;

‘"Underemployment, in particular, is an indicator of labour market spare capacity and a key contributor to ongoing low wages growth’.


The Reserve Bank of Australia (RBA) has explicitly identified low wage growth as a reason for not raising interest rates, so this news may cause long-term damage for the Australian Dollar.

The AUD may have struggled today due to imminent Federal Reserve minutes, which may boost the US Dollar and devalue the Australian Dollar.

Further Losses in GBP AUD Exchange Rate if UK Sales Disappoint



Sterling could extend its decline against the Australian Dollar on Thursday morning, if UK retail sales decline as forecast.

In July, estimates are for slowing retail sales, both with and without fuel sales being counted.

For the Australian Dollar, Thursday could bring an advance if jobs figures show growth as forecast.

Unemployment is not expected to change from 5.6%, but part and full-time employment is still tipped to increase in July.

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.


TAGS: Pound Australian Dollar Forecasts

Comments are currrently disabled