AUD GBP Sees Further Lows as Lockdown Hits Jobs Rebound

AUD GBP Looks for a Catalyst at 0.8300 Level

The AUD=GBP exchange rate was -0.34% lower heading into Friday after the latest Aussie jobs number. The market is looking further ahead at the ongoing lockdown damage with Sydney expected to be closed for business for much of this year.  Today will see data from the UK with consumer confidence and retail sales closing out the week in the pair.

The AUD to GBP has been lower every day this week and trades at new lows for the year.

Lockdowns hit the Australian jobs recovery

Australia’s jobs market recovery stalled last month as the country’s zero Covid strategy fell apart with a surge in cases a return to lockdowns.

Only 2,200 jobs were added to the country’s labor market June, which was down from the 29,000 seen in the previous month after the economy was hit by the latest restrictions. But traders are looking ahead to the damage that will be caused in later months.

Full-time employment dropped by 4,200, according to the Australian Bureau of Statistics, with only part-time hiring preventing a drop in overall employment.

Sydney and Melbourne are the two largest jobs creators and both are seeing strict restrictions.

Robert Carnell, economist for Asia-Pacific at ING, said: “As lockdowns across Australia in August have become more widespread and their severity increased, this is probably going to be only a temporary reprieve before a more obvious reversal.”

“As for the labour market for September and beyond, that hinges on the government’s plans to vaccinate more of the population, how effective this is at preventing the spread of the virus, and whether at higher vaccination levels, the government alters its reaction function in terms of lockdowns if vaccines blunt the severity of the illness and take pressure off the health system,” he added.

Faraz Syed, at Citi, said echoed the expectations for later months:

“The ostensible drop in the unemployment rate is expected to be short-lived, and further declines in employment are expected across August, September and possibly into October.

UK has consumer data ahead on Friday

The Australian Dollar versus the pound will see three sets of economic data on Friday with the release of consumer confidence, retail sales and government borrowing.

Consumer confidence is expected to come in at -7 which is the same figure as the previous month, while retail sales are also expected to drop to 6% from 9.7%. The consumer splurge from the initial economic reopening is starting to level off.

The UK will also see the latest public sector borrowing figures with a drop of 11 billion expected from the previous month as pandemic spending dips with the economic restart.

The pound is seeing some weakness against other currencies over fears that the variant will increase in the autumn and stall the recovery, but Australia is in a worse situation for the moment.

The bank also sees the figure decreasing into 2022, which is in line with the BoE forecast of ‘transitory’ inflation. Economists do not expect a rate tightening in the UK before late 2022 or into 2023.