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GBP to AUD Exchange Rate Surges Despite Strong Australian Employment Data

May 18, 2017 - Written by Tim Boyer

After volatile movement earlier in the week, the Pound to Australian Dollar exchange rate saw strong surge on Thursday in reaction to Britain’s latest retail sales data. The pair easily pushed higher due to poor risk-sentiment.

GBP/AUD began the week trending at around 1.7440 and fluctuated between 1.7350 and 1.7530 for most of the week until Thursday, when it jumped to a new weekly high of 1.7571.

Britain’s April retail sales stats were widely expected to see a decent improvement both month-on-month and year-on-year due to Easter. Easter was held in March last year.

The results were much stronger than analysts expected however, which sent the Pound surging on Thursday. Monthly sales were expected to rise from -1.4% to 1% but jumped to 2.3%, while the yearly figure was predicted to improve to 2.1% but instead doubled from 2% to 4%.

Part of the better-than-expected result was April’s warmer weather, which the Office for National Statistics (ONS) stated made consumers more eager to shop that month.

While some analysts have warned that the jump in retail activity was unlikely to become a trend, this strong figure was enough to delay market concerns about Britain’s economy slowing down due to rising inflation and slowing wage growth.

As a result, investors also became more optimistic on Wednesday’s employment data. This included news that Britain’s key unemployment rate had unexpectedly fallen to a 42-year-low of 4.6%, but poor wage growth stats had previously made investors hesitant to buy up the Pound.

The Australian Dollar has also seen an increase in demand on Thursday due to Australia’s impressive Australian employment results. The ‘Aussie’ was unable to hold its ground against a strong Pound though.

Australia’s unemployment rate unexpectedly improved from 5.9% to 5.7% despite an increase in the participation rate. Employment was predicted to change by around 5k but instead came in at 37.4k.

The strong report was likely to bolster hopes for a sturdier Australian interest rate outlook from the Reserve Bank of Australia (RBA).

However, news that full-time employment in Australia had dropped by -11.6k, as well as risk-off movement in markets, was likely to have limited ‘Aussie’ strength.

Investors have been hesitant to buy riskier assets this week as political and economic uncertainty in the US worsens amid an increasing number of scandals involving US President Donald Trump.

After volatility earlier in the week, it’s still possible the Pound to Australian Dollar exchange rate could weaken again on Friday despite a lack of influential data due before next week.

Next week will see the publication of Britain’s next Q1 Gross Domestic Product (GDP) estimate, but will otherwise be a relatively quiet week for British and Australian economic calendars.
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