The Pound Australian Dollar exchange rate has recovered some of its overnight losses during Tuesday’s session following UK employment data.
Pound Australian Dollar (GBP/AUD) Trends Lower Despite UK Employment Data
AUD exchange rates are trending higher following better-than-expected business confidence data, while commodity prices and Australia bond yields hitting a five-month high bolster the ‘Aussie’.
The GBP/AUD exchange rate has trended lower since the start of the week, with the pairing down nearly 0.2% today, trading at 1.8480.
Pound (GBP) Exchange Rates Steady on Employment Data
The Pound has experienced mixed movement during today’s session after the UK unemployment rate fell from 4.6% to 4.5% in August.
Accompanying data has also driven some movement in the Pound and provided insight for GBP investors for the Bank of England’s (BoE) case to raise interest rates.
The report revealed that payroll numbers increased by 207,000 in September to pre-pandemic levels of 29.2 million.
Office for National Statistics (ONS) Director of Economic Statistics Darren Morgan said:
“The jobs market has continued to recover from the effects of the coronavirus, with the number of employees on payroll in September now well exceeding pre-pandemic levels”
Job vacancies also shot up to hit a record of nearly 1.2 million, causing some investors to be wary over the UK’s labour gap. The 20-year high has caused analysts concern that the staff shortages could hold back the UK’s economic recovery.
Chief economist at KPMG UK, Yael Selfin, commented:
“The recovery is testing the capacity of the economy to adjust to a new post-pandemic environment, a task made more difficult by the reduced availability of overseas workers.
“Acute skill shortages have pushed vacancies to record levels for a second month in a row in September, as employers struggled to find skilled staff.”
Australian Dollar (AUD) Exchange Rates Buoyed by Economic Optimism
The Australian Dollar has been well supported during today’s European session as lockdown easing in New South Wales continues fuelling optimism in the Australian economy recovering.
Further adding to the improving mood was the NAB confidence index for September that came in far higher than forecast, and its highest reading since May.
The commodity-linked ‘Aussie’ has also benefited from rallying commodity prices as coal and gas prices soar, in turn driving up other commodities.
AUD exchange rates have also strengthened on rising bond yields that have risen to their highest level since May.
Yields have risen due to the economic outlook for Australia improving as the economy reopens, leading to bets that the Reserve Bank of Australia (RBA) will come under pressure to tighten monetary policy.
Commonwealth Bank of Australia economist Kristina Clifton said:
“Australian interest rate futures continue to bring forward bets on rate hikes despite the RBA’s guidance that it will not raise the cash rate before 2024.”
Pound Australian Dollar Exchange Rate Forecast: AUD to Benefit from Reopening Optimism
The GBP/AUD exchange rate may continue to come under pressure over the coming days as economic optimism and rising commodity prices drive the Australian Dollar higher.
UK GDP data released tomorrow morning may provide the Pound with some support, with 0.5% growth expected in August, up from July’s 0.1%.
However, UK industrial production may offset GDP data as forecasts indicate a 0.2% slowdown in August from 1.2% the month previously.
Following BoE policymaker comments hinting at tighter monetary policy due to concerns over rising inflation, more insight from central bank officials on the possibility of raising interest rates may drive additional movement in GBP exchange rates.
Meanwhile, the Australian Dollar will look to continue strengthening on reopening optimism.
Consumer confidence and the Australian unemployment rate for September later in the week will also likely cause strong movement in AUD.
Read More: Pound Australian Dollar Exchange Rate Subdued Following UK Employment Data