Australian Dollar Forecast Impacted by UK Unemployment

AUD GBP Higher Despite Higher UK GDP Number

The pound to Australian dollar exchange rate has once again come under pressure, falling to its lowest level in a number of weeks. UK jobless claims have increased to their highest level since 1996 as the Coronavirus crisis continues to adversely impact global economies. April was the first full month of lockdown and yesterday’s figure was a real cause for concern.

According to the Office for National Statistics, the claimant count rose by over 850,000, which is an increase of almost 70%. What is interesting to note that these figures do not include those on furlough so in theory the figure could be a much larger amount with those included.

The data release came out worse than expected which caused the pound to lose some of its early month gains against the euro. Indeed, Sterling Australian dollar exchange rates fell in to the 1.88 territory during yesterday’s trading session. Job vacancies were also hit badly with only 637,000 vacancies during the period between February and April.

Up until the pandemic outbreak, the UK jobs market was performing historically very well. The first quarter of 2020 showed a fall to just 3.9% unemployment. Employment also came out much higher than expected during this period with 211,000 new jobs created.

However, with the lockdown still in place and many people in the UK out of work or furloughed I think we could see further bad news for the unemployment figures during this uncertain period.

However, in terms of the impact upon the pound although we saw a brief fall for GBPAUD exchange rates as everywhere appears to be struggling so the bad news appears to be cancelling each other out.

Sterling Under Pressure in May

Sterling made the headlines yesterday following a report in the Financial Times which labelled the pound the ‘worst performing currency in May’ in a table which featured the G10 nations. The impact of the pandemic has clearly been a factor but news of the Brexit deal is also now beginning to surface.

The pound to euro exchange rate hit its lowest level yesterday since the end of March and the GBPUSD exchange rate also hit its lowest rate to buy US dollars with pounds since 27th March.

The UK and the European Union appear to once again be at loggerheads with one another. The UK appears to want to scrap all levies on £30bn worth of imports with the ‘Most Favoured Nation tariff regime’. This will be used as part of the process during the period until the end of the year until it has created new trade agreements.

Currently, according to the Department of Trade and Industry 47% of trade is tariff free for the UK which works out at approximately £30bn.

Sterling at Lowest Level vs the Australian Dollar Since October 2019

Overnight, the GBPAUD exchange rate dropped in to the 1.86 levels which is the lowest level since October 2019 which is great news for anyone looking to convert Australian dollars into pounds at the moment.

However, one major concern for the Australian economy is that of the unemployment market which has been adversely affected. According to the Australian Bureau of Statistics between mid-March and the beginning of May 7.3% of jobs have been lost which equates to approximately 900,000 across Australia. Australia also appears for once to be challenging China. They have joined more than 120 countries to create an independent inquiry into the outbreak of the Coronavirus.

Last night the Reserve Bank of Australia released their latest set of meeting minutes. The Central Bank appeared to be adopting a wait and see approach before intervening again and this helped to strengthen the Australian dollar overnight against the pound.

As we come towards the end of the week on Friday the UK releases the latest set of UK Retail Sales data as well as Public Sector Net Borrowing. Retail Sales are expected to show a fall of over 16% during April so this could cause the pound to wobble at the end of the week especially if the economic data comes out worse than expected.

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