GBP AUD Jumps on UK Employment Surprise

The GBP AUD exchange rate was 0.63% higher on Tuesday and pressing against the recent resistance after UK employment beat analysts’ estimates. The market was expecting a small increase of 5k jobs, but the UK added 83k jobs for the three months into the end of March. However, inflation is still putting downward pressure on wages despite pay and bonus hikes.

The GBP to AUD trades at 1.7775 with a move above 1.7800 opening the door to further gains.

Australian Reserve Bank warns of further rate hikes

Australians expected to be hit with an even bigger interest rate rise in June as inflation soars at an even faster pace than anticipated.

The Reserve Bank of Australia in May raised the cash rate for the first time since November 2010 and has since released the minutes of that meeting hinting at more pain ahead. Westpac and ANZ banks have matched the RBA’s quarter of a percentage point increase that ended the era of the record-low 0.1 per cent cash rate.

NAB is passing on in full that 0.25 percentage point increase to its variable rate customers while the Commonwealth Bank, Australia’s biggest home lender will also raise rates on Friday in line with the RBA move.

“Members considered three options for the size of the rate increase at the present meeting: raising the cash rate by 15 basis points, 25 basis points or 40 basis points,” the RBA minutes noted.

Meanwhile, the UK equivalent Bank of England was trying to defend their own slow-moving efforts to tackle inflation. The bank’s governor was also seriously concerned about food prices due to supply chain issues from Ukraine.

“The inflation risk factor that I am going to sound rather apocalyptic about is food,” Andrew Bailey said.

“Ukraine does have food in store, but it can’t get it out at the moment,” he added.

“As things stand at the moment it’s getting worse,” he continued. “And that is a major, major worry.

UK employment surges past market expectations

The pound sterling was boosted by the latest employment data which showed 83k jobs added to the economy.

That was well above predictions for a 5k improvement, and the unemployment rate dropped to 3.7%- the lowest since 1974.

However, despite an improvement in wages and bonuses, inflation is still ahead and pushing earnings down. Pay including bonuses jumped by 7 per cent and was up 9.9 per cent in March as companies increased rewards for staff. But the ONS said regular earnings are “falling sharply” in real terms.

Darren Morgan, director of economic statistics at the Office for National Statistics, said: “Continued strong bonuses in some sectors such as construction and especially finance mean that total pay is continuing to grow faster than prices on average, but underlying regular earnings are now falling sharply in real terms.”

Wednesday will be a big day for the pound sterling versus the Aussie dollar as inflation is released for the UK. The figure is expected to jump from 7% to 9.1% in the latest year-on-year figure.

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