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GBP AUD Exchange Rate Advances as Unemployment Holds at Near Twelve-Year Low

April 12, 2017 - Written by John Cameron

The British Pound to Australian Dollar exchange rate continued to plunge throughout Thursday’s European session. Demand for the ‘Aussie’ was strong due to impressive job data and surprisingly dovish comments from US President Donald Trump.

Next week will see the publication of the Reserve Bank of Australia’s (RBA) latest meeting minutes, as well as Britain’s March retail sales figures. However, political jitters could become the main source of GBP/AUD movement regardless.

[Previously updated 13/04/2017]

Australian labour market data offered an upside surprise, with full-time employment rising by 74,500 in March.

In spite of the notorious volatility of the report this offered some encouragement to investors, prompting the GBP AUD exchange rate to enter a sharp downtrend.

[Previously updated 12/04/2017]

The Pound Australian Dollar exchange rate pushed higher in trading today thanks to robust unemployment figures from the UK.

Pound Strengthens as Unemployment Stabilises but UK Workers Face Slowdown in Pay

The Pound Australian Dollar (GBP AUD) exchange rate continued to push higher today as the UK’s unemployment rate holding at a near twelve-year high of 4.7% in February.

However while the jobless figures suggest that the UK labour market continues to strengthen as the number of vacancies struck a record high, investors grew increasingly concerned about the slow pace of wage growth.

With the inflation rate holding at a three month high of 2.3% in March, markets fear that the lacklustre rise in real pay will begin to hinder consumer spending in the second quarter of 2017.

Stephen Clarke, economic analyst at the Resolution Foundation thinktank said;

‘Britain’s brief pay recovery has come to an end. Forty per cent of the workforce are experiencing shrinking pay packets according to the latest figures, in sectors ranging from accommodation to finance and the public sector. Many more will join them in the coming months as inflation continues to rise, with pay across the economy as a whole set to have fallen in the first three months of 2017.’

With consumer spending being a major contributor to UK economic growth, the potential drop is likely to cause a slight sense of panic amongst investors, especially in the face of Brexit uncertainty which is already expected to cause household to refrain from making purchases over the coming months.

Australian Dollar Tumbles as Iron Ore Enters Freefall

The Australian Dollar slumped on Wednesday as iron ore prices witnessed their largest single day decline in over a year.

With the spot price for benchmark 62% fines plummeting8.5% to $68.04 a tonne in trading today, the price of Australia’s largest export has now nosedived by 28.3%, after striking a multi-year high of $94.86 a tonne at the end of February.

Analysts have been predicting for months now that the bottom would fall out of the iron ore market after it began to tear higher at the end of 2016, despite there being little fundamental support for the rise.

The fall has also mirrored the slide in Chinese steel markets as the slowdown in construction has lead to falling demand for rebar and a subsequent decline in the raw iron ore required to produce it.

GBP AUD Exchange Rate Forecast: Australian Employment Data Ahead

The GBP AUD exchange rate may slip from its highs tomorrow as Australian releases its latest employment data.

While the Unemployment rate is not expected to drop from 5.9%, investors are likely to react positively the Employment Change figures as 20,000 new workers are expected to have joined the workforce.

Meanwhile a lull in UK data ahead of the Easter weekend could cause the Pound to tumble as it will have little momentum to propel it higher against the Australian Dollar.

Current Interbank Exchange Rates

At the time of writing the GBP AUD exchange rate was trending around 1.66 and the AUD GBP exchange rate was trending around 0.59.
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