Pound Australian Dollar Exchange Rate News: GBP/AUD Wavered on Mixed UK Jobs Data

September 13, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Wavered on Mixed UK Jobs Data

Pound (GBP) Fluctuated on Mixed Employment Data

The Pound (GBP) enjoyed mixed success against its peers on Tuesday as jobs data printed, giving early hints that the labour market pressures could be finally easing.

The unemployment rate fell further than forecasts as it fell to a 48-year low of 3.6%. With expectations of 3.8%, held for three consecutive months, ticked even lower as the unemployment rate hit the lowest since 1974. The 0.2% decrease in employment rate to 75.4% is still below pre-pandemic levels due to a drop in part-time employment.

Meanwhile, annual average wages, including bonuses, jumped up 5.5% in three months up to July. But despite this, pay growth continues to lag behind inflation as cost of living continues to squeeze households, and set to get worse through winter. According to the Office for National Statistics (ONS), it says its one of the worst drops in real pay in the past 20 years. The ONS says:

‘Growth in total and regular pay fell in real terms (adjusted for inflation) on the year in May to July 2022, at 2.6% for total pay and 2.8% for regular pay; this is slightly smaller than the record fall we saw last month (3.0%), but still remains among the largest falls in growth since comparable records began in 2001.’

More concerning news was that wages are likely to lag behind inflation for the rest of the quarter, according to National Institute of Economic and Social Research (NIESR). Those in the public sector will be worst hit. Paula Bejarano Carbo, Data Analyst at NIESR, said:

‘Strikingly, the figures today note the largest disparity in public and private sector wages recorded outside of the pandemic period, where private sector regular pay grew by 6 per cent while its public sector counterpart grew by 2 per cent. Workers in these sectors may well be asymmetrically equipped to deal with the ongoing cost of living crisis.’

Australian Dollar (AUD) Quiet Despite Improved Confidence and Risk-On Market

The Australian Dollar (AUD) failed to find much strength on Tuesday despite a surprising uptick in both consumer and business confidence.

The Westpac-Melbourne Institute Index of Consumer Sentiment for Australia far surpassed forecasts and leapt to 84.4, the first rise since November 2021. Westpac chief economist Bill Evans is equally as surprised at the survey, saying:

‘The improvement is a little surprising, especially given continued sharp rises in the cost of living and the RBA’s decision during the survey week to make another 50bp hike in the cash rate.’

Also matching the upbeat change in sentiment was an equally improved business confidence level. Rebounding from the June low of 1, business confidence rose by 2 points to reach 10, the highest since April. Alan Oster, NAB Group Chief Economist, said:

‘Overall, the survey indicates that demand remained strong. We continue to expect that inflation and rising interest rates will eventually begin to weigh on the household budget. So far, however, it appears this dynamic is yet to take hold.’

GBP/AUD Exchange Rate Forecast: Pound to Fall on Softening Inflation?

Looking ahead, all eyes will be on the UK inflation rate on Wednesday. With expectations of a slight climb in the CPI reading, the Pound could be bolstered on further rate hikes. However, some experts are expecting the inflation rate to soften, due to fuel prices falling. If so, Sterling could come under renewed pressure.

Elsewhere, data remains thin on the ground until Thursday when both the unemployment rate and the Reserve Bank of Australia (RBA) bulletin are released. Any further comments on the central bank’s monetary policy going forward could see the ‘Aussie’ fluctuate further.

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