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GBP/AUD News: Pound Australian Dollar Exchange Rate Wavers following Strong Australian Jobs Report

June 15, 2023 - Written by John Cameron


The Pound Australian Dollar (GBP/AUD) exchange rate attempted to recover on Thursday morning after stumbling overnight following strong Australian jobs data.

At the time of writing, GBP/AUD was trading at around AU$1.8601, up over 0.3% from an earlier low of AU$1.8534 but still down on the previous day’s levels.

Australian Dollar (AUD) Buoyed by Upbeat Employment Data

The Australian Dollar (AUD) strengthened in the overnight session from Wednesday into Thursday after Australia’s latest labour market report exceeded expectations.

The country’s unemployment rate unexpectedly dropped from 3.7% to 3.6%, even as the participation rate jumped by 0.2 percentage points.

Employment climbed by 75,900, the highest rise in a year and well above forecasts of 15,000. The rise in full-time employment was particularly strong at 61,700 versus 14,300 new part-time workers.

The latest data suggests that the Australian labour market continues to run hot, which may prompt further interest rate rises from the Reserve Bank of Australia (RBA).

The RBA has recently started raising interest rates again after a short pause in its hiking cycle. At its last two meetings, the bank shocked markets by hiking rates and signalling that there may be further increases to come. This latest jobs report increases the likelihood of another rate hike next month.

This saw the Australian Dollar jump higher in overnight trade, but the ‘Aussie’ began to trim its winnings as Thursday’s European session began.

A souring market mood applied some pressure to the risk-sensitive currency. Investors seemed anxious about the prospect of ongoing interest rate rises around the world, with rising borrowing costs and stubbornly high inflation weighing on global growth.

Pound (GBP) Underpinned by BoE Bets

Meanwhile, the Pound (GBP) began to recoup overnight losses on Thursday morning as markets continued to bet on more interest rate rises from the Bank of England (BoE).

This week, strong data releases have cemented expectations that the bank will need to keep tightening monetary policy. UK unemployment fell while wage growth accelerated more than expected.

Furthermore, the latest UK GDP showed that the British economy grew 0.2% in April, raising hopes that the country will avoid a recession.

In the wake of these releases, markets began pricing in additional rate hikes from the Bank of England.

Chancellor Jeremy Hunt said on Wednesday that the BoE must keep hiking to tame inflation. On Thursday, Hunt’s advisor and former BoE rate setter Sushil Wadhwani agreed, saying:

‘Inflation untimely is the enemy of growth. It’s very important for us to get inflation down if you want sustainable growth.

‘In that sense it’s important to continue administering the medicine, in the form of higher interest rates, notwithstanding the side-effects, because if we delay raising rates then we might find the disease gets worse and we might then find that we have to do even more and experience even worse side effects.’

The prospect of rising interest rates underpinned the Pound ahead of the BoE’s policy meeting next week.

GBP/AUD Exchange Rate Forecast: Mixed Movement Ahead?

UK and Australian economic data remains sparse for the rest of the week, which may lead to limited or unpredictable movement in the Pound ‘Aussie’ pair.

Amid the lack of data, risk appetite could be the driving factor behind the GBP/AUD exchange rate through Friday’s trade. If market sentiment remains risk-off, we could see Sterling climb against the riskier ‘Aussie’.

Bets on more policy tightening from both the Australian and British central banks could infuse some volatility into the pair. We may see AUD gain ground during the overnight trading hours only to cede its gains when the European session commences.

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