Pound Australian Dollar (GBP/AUD) Exchange Rate Flat as Worst Yet to Come for Aussie Unemployment Rate

April 16, 2020 - Written by John Cameron

STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Flat as Worst Yet to Come for Aussie Unemployment Rate

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Muted as Aussie Unemployment Edges Higher

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate remained flat on Thursday, leaving the pairing trading at around AU$1.9814.

The ‘Aussie’ remained flat today after data revealed that the country’s unemployment rate edged slightly higher in March.

However, economists have warned that the worst was yet to come as the monthly data was collected before the widespread restrictions and shutdowns began in attempts to slow the spread of coronavirus.

Australian unemployment edged up to 5.2% despite expectations of a jump to 5.5% from February’s 5.1%.

The Australian Bureau of Statistics (ABS) showed that 5,900 jobs were added to the economy in March despite a predicted decrease of 40,000.

According to National Australia Bank economist Kaixin Owyong:

‘These figures are likely to deteriorate sharply in April where we expect a large rise in unemployment, which we forecast to reach 11.75% by mid-year.

‘Widespread reports of workers being stood down and hours being cut as businesses grapple with a sharp pullback in demand for their goods and services should result in a collapse in hours worked and a sharp rise in underemployment.

‘We also expect labour force participation to fall in coming months as workers are prevented or discouraged from looking for work amid the coronavirus pandemic.’

Sterling (GBP) Flat as British Government Expected to Extend Lockdown

The Pound was left flat against the Australian Dollar today ahead of the expected lockdown extension announcement from the British government.

However, according to Michael Hewson, chief market analyst at CMC markets, the extension of the lockdown was already priced into the Pound.

He noted Sterling is more driven by the strength of the US Dollar (USD) and stated:

‘[I’m] still looking to buy dips in the short to medium-term simply on the basis that it’s probably a better bet than the Euro at the moment.

‘In terms of where the Pound could go in the short to medium-term, it could probably drift back to around $1.225 over the course of the next few sessions but ultimately I don’t expect it to weaken profoundly and if it does it’ll only be as a result of a big rise in the value of the Dollar.’

Meanwhile, the pairing was left flat as traders focused on the coronavirus pandemic and risk appetite was hit by further evidence the United States was in the midst of a deep recession.

The risk-off mood continued this morning and according to Lee Hardman, currency analyst at MUFG:

‘The return to more risk-off trading has been triggered by two key drivers. Firstly, the price of oil has resumed its decline after details of the historic oil production agreement were finally revealed [...] Secondly, the latest economic releases yesterday confirmed that the COVID-19 shock has sent the US economy into freefall.’

Pound Australian Dollar Outlook: Chinese Data in Focus This Week

Looking ahead to Friday, the risk-sensitive Australian Dollar (AUD) could suffer some losses against the Pound (GBP) following the release of GDP and retail sales data from China.

If March’s data reveals GDP has contracted further than expected due to the coronavirus pandemic, the ‘Aussie’ will suffer losses as traders head towards safe-haven currencies.

Added to this, if further data shows retail sales plummet, it will cause the Pound Australian Dollar (GBP/AUD) exchange rate to trade slightly higher.

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TAGS: Pound Australian Dollar Forecasts