AUD/GBP Collapses on Latest UK ‘Brexit’ Referendum Poll
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Cool risk appetite weighed on the Australian Dollar to Pound Sterling exchange rate yesterday, with the ‘Aussie’ plummeting to 12-week lows after the latest UK referendum poll.
Australian Dollar (AUD) Slumps on US Fed Confidence and Declining Commodities
A bout of correctional trading was exacerbated by safe-haven demand and falling commodity prices yesterday, driving the Australian Dollar into negative territory. Bullish trading followed Tuesday’s release of the May minutes from the Reserve Bank of Australia (RBA) policy meeting, with profit-taking subsequently weakening gains made on the back of the positive news. However, investors realising their gains were joined by those cutting their losses on Wednesday, after the US Fed strengthened safe-haven demand with hawkish rate hike talk.
Dennis Lockhart and John Williams both stated that they expected US interest rates to increase two or three times over the course of 2016, noting that they believed June’s policy meeting was still ‘live’. Robert Kaplan then commented that he may push for a rate hike at the June or July meeting. Rate hike bets have increased, although even with the bold comments of three Fed officials, the markets are predicting just a 15% chance that the benchmark rate will be increased at the next policy meeting.
Domestic data further softened the ‘Aussie’s position. The Westpac Leading Index figure dropped from -0.1% to -0.2%, while quarter-on-quarter wage price growth slowed from 0.5% to 0.4% and year-on-year growth dropped from 2.2% to 2.1% in Q1. This could suggest a further weakening of inflationary pressures, creating a downside risk to RBA monetary policy.
Mixed Labour Market Data Causes Pound Sterling Tremors before ‘Brexit’ Surge
Yesterday’s UK data docket contained news which unsettled investors. While employment hit its highest level since records began, with the claimant count change showing a surprise drop in joblessness claims in April, earnings data clouded the picture. Earnings including bonuses rose against forecast, while earnings excluding bonuses ignored expectations of a rise to slip to 2.1%. This initially softened the Pound, with investors worried that sluggish wage growth would continue to dissuade the Bank of England (BoE) from raising interest rates.
However, the Pound’s fortunes were quickly reversed following the publication of new ‘Brexit’ polls. While the latest YouGov poll showed a slight fall in support for ‘Remain’, following a methodological tweak, fresh figures from Ipsos MORI gave the ‘In’ campaign a massive 18% lead, with 55% of support compared to 37% for the ‘Leave’ side.
The GBP/AUD exchange rate extended gains of over 1% during the London session.
Australian Dollar to Pound Sterling Exchange Rate Forecast: Australian Unemployment Predicted to Rise
The ‘Aussie’ may not be able to recover its losses today as the headline unemployment rate is predicted to rise from 5.7% to 5.8%, while the Employment Change is expected to slow from 26.1k to 12k.
The UK has retail sales figures for April, which are forecast to show an improvement, although ‘Brexit’ speculation could continue to keep the Pound strong regardless of the data outcome.
At the time of writing, the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was trending between 0.4997 and 0.5061, while the Pound Sterling to Australian Dollar (GBP/AUD) traded between 1.9748 and 1.997.