GBP AUD Slides as Australian Employment Beats

GBP AUD Consolidates with UK Employment Due

The GBP AUD exchange rate was lower by-50% on Thursday after the latest Australian employment report was an improvement on forecasts. Markets had expected a gain of 43k jobs but the official number from the ABS was 64.8k, with a big drop in the unemployment rate to 4.2%.

The GBP to AUD rate was trading at 1.8780 after failing to keep the highs near the 1.9000 level.

Australian unemployment at 13-year low

Australia’s jobless rate dropped to the lowest point in over 13 years as the economy made a roaring return late 2021. The number has prompted one of the nation’s big four banks to speed up its prediction of the first hike in interest rates.

The Australian Bureau of Statistics said the economy produced 64.8k jobs in comparison to 43k expectations, but these figures will not include any Omicron disruption. The ABS said that to find a result under 4% you needed to go way back to the 1970s.

Markets are now betting that a tightening will come a lot sooner than expected, perhaps as early as May given the persistence of global inflation. Data on Australian consumer prices for the December quarter is due next week and economists are predicting core inflation could jump to its highest since 2009 at 2.5%, adding to the case for an early rate rise.

Bill Evans, chief economist at Westpac, said an increase would now come in August, following his previous call for February 2023.

“Our forecast revisions reflect a much faster lift in inflation and wages growth than envisaged,” said Evans. “We now expect one hike of 15 basis points in August to be followed by a further hike of 25 basis points in October.”

UK moves to ditch plan B virus restrictions with variant peak

In the United Kingdom, the Prime Minister announced that many restrictions would now be eased as the coronavirus variant has peaked in the country.

The legal requirement for facemasks will be dropped and work-from-home guidance is also being removed, while the ill-fated NHS digital app is also being scrapped.

The moves mark a swift U-turn after two years of heavy rules and the Tories may be looking at a chance to boost their flagging approval ratings after the recent Downing Street party scandal. The Prime Minister is still not out of the woods, with the independent inquiry expected to be released next week.

Tomorrow will see retail sales and consumer confidence released tomorrow for the UK after jobs and inflation this week supported the rate hike policies.

Governor Bailey of the Bank of England was talking to a Parliamentary Committee on rates and said that the Bank’s regional agents were seeing evidence of second-round inflation pressures. He said there was concern of “second round effects” on wages from rising inflation and a “tight” jobs market. Bailey said the labour market is currently “very tight” in terms of supply, with too few applicants chasing the 1.24 million vacancies seen in this week’s jobs report.

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