GBP to AUD Exchange Rate Holds Near Monthly Highs Following UK Job Report

January 25, 2018 - Written by Toni Johnson

STORY LINK GBP to AUD Exchange Rate Holds Near Monthly Highs Following UK Job Report

While the Pound’s bullishness slowed on Thursday, it was still able to hold its ground against the Australian Dollar so the British Pound to Australian Dollar (GBP/AUD) exchange rate continued to trend closely to its best levels in over a month. The pair is likely to see limited movement until key data comes in on Friday.

This week has seen the biggest movement in GBP/AUD for over a month too. GBP/AUD opened the week at the level of 1.7318 and has so far climbed to near the level of 1.7645. The pair touched on a monthly high of 1.7686 during Thursday’s Asian session.

GBP Holds Gains after Wage-Inspired Rally

Due partially to weakness in other major currencies like the US Dollar (USD) and Euro (EUR) this week, the Pound has been able to capitalise on Britain’s latest job market stats.

Wednesday saw the publication of Britain’s job market report from November, which beat expectations in some notable prints and boosted market confidence in Britain’s economy.

While the key unemployment rate remained at 4.3% as expected, the employment change figure beat forecasts of coming in at -12k by improving from -56k to 102k.

On top of this, wage growth data was solid. The average earnings figure including bonuses remained at 2.5% as expected, while the figure excluding bonuses surprised investors by rising from 2.3% to 2.4%.

The news bolstered market hopes that the gap between UK wage growth and domestic inflation was narrowing, following an ongoing pay squeeze that has dampened spending power for UK households over the last year.

Some analysts saw the data as an opportunity to take increasingly hawkish stances on their expectations for the Bank of England (BoE) this year. According to Paul Hollingsworth from Capital Economics;

‘With surveys suggesting recruitment difficulties are building and the latest pay settlements surveys also strong, a further acceleration in wage growth is in prospect.

As a result, we continue to think that the Monetary Policy Committee will hike rates three times this year, much more than markets expect — with the next hike coming in May.’

With BoE interest rate hike bets rising and UK data continuing to indicate that the British economy has been more resilient in the Brexit process than expected, the Pound easily sustained gains against the Australian Dollar.

AUD Supported by Westpac’s Leading Index Report

The Australian Dollar has been unable to hold against a bullish Pound this week, but did hold its ground better on Thursday.

The recent weakness in the Australian Dollar, coupled with the poor performance of the US Dollar (USD), has made investors hesitant to continue selling the ‘Aussie’.

Australian Dollar trade became more resilient following the publication of Westpac’s December leading index report, which indicated that Australia’s economy would be growing higher above trend than expected around six months from now.

While this helped the currency to avoid further losses today, it was too low-influence to prevent Sterling’s Wednesday advances.

Overall though, while GBP/AUD fluctuated on Thursday morning a lack of notable Australian data as well as market hesitance to move much on risk-correlated currencies has left ‘Aussie’ movement uninspired.

GBP/AUD Forecast: Key UK Gross Domestic Product (GDP) Projection in Focus

Friday will see the publication of Britain’s Q4 Gross Domestic (GDP) projections for Q4 2017 and the typically influential report could cause some late-week movement in GBP/AUD.

Markets expect UK growth will have remained at 0.4% quarter-on-quarter and have slowed from 1.7% to 1.4% year-on-year.

If the UK growth report beats expectations, it would boost hopes that Britain’s economy has been resilient despite the ongoing Brexit process.

As a result, strong UK growth stats could boost GBP/AUD to new monthly highs, while poor job data could cause the pair to shed some of its recent gains.

The Australian Dollar, on the other hand, could be influenced by any market shifts in risk-sentiment ahead of next week’s notable Australian ecostats including business confidence and inflation.

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TAGS: Pound Australian Dollar Forecasts