The AUD GBP exchange rate was lower again after a dismal Australian employment report came in worse than expected. The Aussie now trades near the 0.5280 mark, around 60 pips shy of the yearly lows.
The AUD to GBP exchange rate has seen its economic data for the week and will likely trend towards pound strength.
Australian employment tumbles worse than expected
Australia’s economy lost more jobs than expected in August as the latest round of government lockdowns in the nation’s two largest cities destroyed the country’s economic rebound.
The Aussie dollar edged lower against the British Pound as employment fell by 146,000 last month, compared to forecasts of an 80,000 decline.
The latest figures underline the Reserve Bank’s decision to delay a review of its weekly bond purchases. Policymakers at the bank correctly anticipated that the worst hit would be to hours worked and participation, with employers likely making temporary layoffs.
“The conventional definition of unemployed – namely that someone is actively searching for work and available to begin – has little meaning in a world where so many jobs cannot be performed,” said Callam Pickering, economist at jobs website Indeed.
“Throughout the pandemic, job losses have consistently been absorbed by lower labor force participation,” he said. “A better measure to understand the impact of economic restrictions is hours worked.”
Traders are hoping that the recent comments from the government will see lockdowns removed before the end of the year as vaccinations roll out.
Goldman Sachs boosts the pound sterling with rates forecast
Investment bank Goldman Sachs gave sterling a boost as they brought their Bank of England rate hike forecast forward by more than a year. This week’s stronger UK employment and inflation reports have forced their hand.
“The recent data on the UK labour market have been stronger than expected, and indicators imply a smoother furlough unwind than we previously assumed,” said Steffan Ball, Chief UK Economist at the bank.
“Our analysis suggests that underlying wage growth is strong and inflation pressures are firming more than anticipated,” said Ball.
“MPC member commentary, combined with the new Chief Economist appointment, suggests that a majority of the committee now view the minimum conditions for starting monetary policy tightening have been met,” added Ball.
Goldman Sachs have now changed their baseline forecast for interest rate rises to May 2022. The bank’s previous forecast was for a first increase in the third quarter of 2023.
The reopening of UK schools and the anticipated return to offices have failed to boost consumer spending in the first half of September, raising concerns about the pace of the recovery.
In the week to September 9th, spending on credit and debit cards decreased by 5% from the previous week and was below pre-pandemic February 2020 levels, according to data published on Thursday by the Office for National Statistics. Retail footfall in the UK also fell by 4% from the previous week and was over 15% lower than the equivalent week in 2019.
This week’s data should continue to support the pound sterling versus the Aussie dollar.