Australian Dollar Pound Exchange Rate Volatility Forecast on Labour Market Data
Weaker UK Inflation Shored up Australian Dollar Pound Exchange Rate
Despite the tone of the Reserve Bank of Australia’s (RBA) November meeting minutes being relatively hawkish the Australian Dollar (AUD) was on a weaker footing against many of the majors on Tuesday. Market risk appetite generally declined as investors continued to grapple with the implications of the US presidential election and the lack of clarity in Donald Trump’s economic policies. With the commodity rally faltering the antipodean currency was weighed down, although this failed to put the Australian Dollar Pound Sterling (AUD GBP) exchange rate on a downtrend.
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Confidence in the Pound (GBP) was dented by a circulated memo which noted that the UK government has ‘no plan’ for Brexit. Investors were also discouraged by a downside disappointment from the October Consumer Price Index, which clocked in at 0.9% rather than 1.0% as forecast. While the corresponding Producer Price Index showed a sharp jump the weakness of the Pound has yet to filter through into the wider economy, something that reduces the chances of the Bank of England (BoE) raising interest rates in the near future.
AUD GBP Exchange Rate Forecast: UK and Australian Labour Market Data in Focus
Tonight’s raft of UK labour market data could offer the Pound a rallying point, though, if employment conditions show signs of continued robustness. Of particular note to policymakers will be the average weekly earnings figure, which is predicted to have shown a modest uptick in the three months to September. If wage growth starts to increase then worries over an inflation-fuelled earnings squeeze could be diminished, a positive prospect for the Pound. On the other hand, further stagnation would likely boost the AUD GBP exchange rate higher.
Thursday will see the release of Australia’s employment data, meanwhile, which is expected to provoke further volatility for the ‘Aussie’. As the RBA has expressed some concern over the state of the domestic labour market any weakness here could renew speculation over the outlook of the central bank. With the unemployment rate forecast to have risen from 5.6% to 5.7% this could set the AUD GBP exchange rate on a fresh downtrend, particularly if market risk appetite deteriorates further.