The GBP AUD exchange rate was 0.60% higher after the UK released its latest employment figures. A record jump in payrolls after the end of the furlough scheme took the unemployment rate to 4.3%. The latest figures give support for an interest rate rise for the British economy, while RBA comments suggest otherwise for the Aussie dollar.
The GBP AUD exchange rate was trading at 1.8350 after the latest economic data.
UK unemployment drops despite end of furlough
The UK jobs market remained resilient despite the end of the government’s furlough scheme last month, according to official data. The release could smooth the path for a Bank of England rate hike in the next months.
Sterling was stronger across the board after the number of staff on businesses’ payrolls in October rose to 0.8% above levels in February 2020, before the coronavirus pandemic hit.
The latest figures also brough the unemployment rate lower to 4.3%, which beat analysts’ estimates of 4.4%.
“Now that today’s labour market data shows that hurdle has been cleared, we think the Bank of England has the green light for interest rate lift-off at their December meeting,” said Ambrose Crofton at JP Morgan Asset Management.
Analysts at Oxford Economics were not so bullish, saying:
“Given the cost of living challenges facing households and a full assessment of furlough’s end arguably needing several months’ worth of data, we narrowly think the MPC will delay rate lift-off until February,” Goodwin said.
The ONS added that average weekly earnings in the July-September period were 5.8% higher than in the same period in 2020, the smallest annual increase since April.
Governor Lowe sees Australia dodging inflation beast
The Reserve Bank of Australia’s pandemic policy settings will be reviewed next year, including its yield curve target and bond buying program.
Treasurer Josh Frydenberg flagged a possible review of the RBA after next year’s election; the probe announced by the bank on Tuesday would specifically focus on the bank’s policy response to the pandemic.
The RBA’s move may be viewed by some as a way of dodging a deeper dive into its response, called for by the OECD and Labor.
“We’ve implemented incredibly innovative policies, things that I never thought we will do,” he said. “It’s appropriate I think once we get to the other side, next year, that we step back and review that.”
In a speech to economists on Tuesday, Governor Lowe said that the risk from inflation should be subdued.
“We still have a way to go. “Underlying inflation has only just returned to the target range for the first time in six years and is only just above the bottom of that target range.”
“It is hard to precisely define what ‘sustainably in the target range’ means,” he said. “But we want to see underlying inflation well within the 2 to 3 per cent range and have a reasonable degree of confidence that it will not fall back again.”
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