Pound to Australian Dollar (GBP/AUD) Exchange Rate Falls as UK Unemployment Rises Before Covid-19

April 21, 2020 - Written by John Cameron

STORY LINK Pound to Australian Dollar (GBP/AUD) Exchange Rate Falls as UK Unemployment Rises Before Covid-19

GBP/AUD Exchange Rate Sinks as UK Joblessness Rises

The Pound to Australian Dollar (GBP/AUD) exchange rate dipped by -0.4% today, with the pairing currently trading around AU$1.952.

Today saw the release of the UK’s ILO Unemployment Rate report for February, which rose by 4% even before the coronavirus was detected in Britain. As a result, this has left British markets concerned that March and April will see a significant surge in unemployment owing to the coronavirus crisis.

John Philpott, the Director of the consultancy The Jobs Economist, commented:

‘The UK labour market looks to have cooled before the Covid-19 lockdown measures placed the economy in a coma to help save lives.’

‘Given what we know about the massive shock to the economy in the past month, it’s disconcerting to see that the jobs market was already starting to look a bit off colour when Covid-19 arrived on our shores.’

Nevertheless, there is some hope that the Government’s furlough scheme could curtail a massive rise in unemployment in the coming months. Although some analysts believe that the UK jobless rate could mirror that of the US and surge by over 20%.

Meanwhile, the Pound (GBP) has remained subdued following yesterday’s comments from Prime Minister Boris Johnson, who warned that we could see a ‘second peak’ of Covid-19 should the Government prematurely ease lockdown measures.

Australian Dollar (AUD) Edges Higher Despite Australia’s Fears of Contraction

The Australian Dollar (AUD) edged higher against the weaker Sterling today despite the Reserve Bank of Australia’s (RBA) warning that Australia could see the ‘biggest contraction since [the] 1930s’.

Philip Lowe, the Governor of the RBA, commented:

‘In terms of the immediate outlook, the next few months are going to be very difficult ones for the Australian economy.’

‘So the result of both the restrictions and this uncertainty is that over the first half of 2020, we are likely to experience the biggest contraction in national output and national income that we have witnessed since the 1930s.’

On top of that, fears are rising over Australia’s unemployment rate after Mr. Lowe mentioned that joblessness could rise by 10% by June.

However, the risk-sensitive ‘Aussie’ has performed well against the Pound today partly due to hopes that Europe’s coronavirus cases could be dropping, with various nations such as Germany, Spain and Netherlands relaxing their lockdown measures.

GBP/AUD Outlook: Could ‘Aussie’ Sink as Market Volatility Increases?

Australian Dollar (AUD) investors will be looking ahead to tomorrow’s release of March’s Australian Westpac Leading Index. If this slumps significantly, then we could see the ‘Aussie’ shed some of its gains against the Pound.

Meanwhile, Pound investors will be awaiting tomorrow’s UK CPI report for March. Any signs of inflation undercutting forecasts tomorrow would prove GBP-negative.

The GBP/AUD exchange rate will remain sensitive to risk sentiment this week. However, with global markets volatile due to plummeting oil prices and coronavirus fears, we could see the Australian Dollar shed today’s gains.

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