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Pound Australian Dollar (GBP/AUD) Exchange Rate Surges as UK Wages Increase Above Forecast

January 22, 2019 - Written by John Cameron

GBP/AUD Exchange Rate Rises as Australian Dollar is Hit by Weakening Chinese Economy

The Pound Australian Dollar (GBP/AUD) exchange rate is up today and is trading around AU$1.8109 on the inter-bank market.

The Pound (GBP) gained against the Australian Dollar (AUD) today after the publication of the UK wage figures – including bonuses – increased above expectation at 3.4%.

Tej Parikh, a Senior Economist at the Institute of Directors, said:

‘The recent pick-up in salaries, coupled with the fall in inflation, will be welcomed by households, though the hangover of weak real wage growth over the past 18 months will continue to be felt on the high street for the time being.’

Today also saw the release of the UK public sector net borrowing figures for December which also increased above expectation to £2.112bn, although this was less positive for the Pound.

The Australian Dollar, meanwhile, has failed to recover from yesterday’s poor Chinese data, which showed that its growth rate had slipped to 6.6% – its slowest growth in 28 years – dampening confidence in the now risk-off ‘Aussie’.

Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as May’s Brexit ‘Plan B’ Gains Support

The Pound has benefited from Prime Minister Theresa May’s Brexit ‘Plan B’ gaining some traction after some Conservative MPs backed it, buoying confidence in Sterling as Brexit debates show some signs of progressing.

Labour leader Jeremy Corbyn has also tabled an amendment which effectively opens up options for MPs, further increasing the likelihood of a second referendum and challenging the Brexit deadlock.

Corbyn said:

‘Our amendment will allow MPs to vote on options to end this Brexit deadlock and prevent the chaos of a no-deal. . . It is time for Labour's alternative plan to take centre stage, while keeping all options on the table, including the option of a public vote.’

AUD/GBP Exchange Rate Drops as Chinese Economy in ‘Serious Danger’ and Home Sales Plummet

The Australian Dollar, meanwhile, has suffered after yesterday’s publication of Australia’s HIA new home sales figures for December which dropped to -6.7%, their level since 2012.

‘Aussie’ investors have also been discouraged by Chinese President Xi Jinping’s comment that the Chinese economy faces ‘serious dangers’, and with China being Australia’s largest trading partner this has had investors fleeing to safe-haven currencies.

AUD has failed to benefit from comments of easing US-China trade tensions, with billionaire investor and Chairman of the Carlyle Group, David Rubenstein, commenting:

‘My view on the China negotiations is that it is likely something will come to pass in the next few months. I think both sides recognize it that's it's not in either sides interest to have this go on.’

GBP/AUD Forecast: Pound Could Rise if May’s ‘Plan B’ Gains Traction with MPs

Sterling investors will be keeping a close eye on Brexit developments this week, and with any signs of Theresa May’s ‘Plan B’ facing increasing criticism – or with MPs resigning over her refusal to rule out a no-deal – the Pound could weaken against the ‘Aussie’.

Australian Dollar investors will be looking ahead to Thursday which will see the printing of Australia’s unemployment rate figures for December, and with any signs of a decrease this could provide some much-needed uplift for the AUD/GBP exchange rate.

Both the Pound and the Australian Dollar, however, will remain sensitive to political developments in the coming week, and with any signs of May’s plan meeting the approval of the EU likely to see the GBP/AUD exchange rate strengthen.

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