Disappointing data Down Under
The pound (GBP) to Australian dollar (AUD) rate crept over $1.83 for the first time since late May on Wednesday, following a surprising slump in consumer confidence Down Under. The disappointing reading – down from 0.6% to -0.6% – came despite the Reserve Bank of Australia’s (RBA) attempts to lift the economic gloom by cutting interest rates earlier this month. Even a strong showing from the Chinese consumer price index couldn’t shore up the AUD, with existing worries over the strength of the economy showing no signs of abating. Not to mention the persistent market jitters surrounding the health of US-China trade relations.
The AUD remained on the back foot after RBA Assistant Governor, Luci Ellis’s suggested unemployment needs to fall below 4.5% for inflation to meet the bank’s target – and we didn’t have to wait long to find out if this was possible. Today’s session got off to a frenetic start Down Under, with a raft of significant data releases overnight – including those all-important employment figures. As expected, the jobless rate remained over 5% in May – well above the level the RBA estimates is needed to stoke inflation – despite the creation of 42,300 jobs.
The GBP had to wait until late last night for the release of any noteworthy economic news. This came courtesy of the latest RICS Housing Price Balance survey, which improved to -10 in May – up from -22. Some comfort can be extracted from the reading, which suggests the housing market may be steadying. The anecdotal insight provided by respondents is still largely cautious, however, reflecting underlying concerns about the political and economic climate.
Labour attempt to block a no-deal Brexit
The GBP dodged uncertainty surrounding Brexit and the Conservative leadership contest for most of Wednesday after Labour Party MPs tabled a cross-party motion aimed at preventing a no-deal. The news boosted market hopes that a no-deal Brexit could be avoided if a Eurosceptic Tory wins the keys to 10 Downing Street. The pound profited and the GBP to AUD pair continued its ascent. However, it wasn’t long before MPs had rejected Labour’s plans to take control of Parliament’s timetable, blocking their attempt to stop the UK leaving the EU without a deal.
With all things quiet on the data release front in the UK today, the pound’s fortunes will rest firmly on the first round of voting in the Conservative Party leadership contest. The result of which will reveal who has taken a step closer to Downing Street and who has fallen by the wayside. Attention will then turn to tomorrow’s speech by the Governor of Bank of England, Mark Carney.
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