The GBP AUD exchange rate is still stuck in a tight trading range and may be waiting for Thursday’s Bank of England meeting. Tuesday’s employment numbers for the UK were higher but the unemployment rate increased, and wages were seen surging at the fastest rate in 20 years. A power crisis is gripping Australia with five states facing power outages.
The GBP to AUD rate was trading at 1.7510 as the pair awaits a further catalyst for direction.
Eastern Australia facing power outages
Eastern Australia is facing power outages again with regulators stepping in to order generators into the market to avoid further outages and blackouts.
All of the five states in the national electricity market– from Queensland to Tasmania – had issues with electricity on Tuesday. AEMO, the Australian Energy Market Operator, had initially said that Victoria could face blackouts on Wednesday, but cancelled the alert on Tuesday afternoon after the market responded. However, the Victoria energy minister, Lily D’Ambrosio, said the recent energy scare was down to “strange behaviour” from the power companies that she said were sitting on reserves and not bidding into the market. D’Ambrosio commented that generators were “potentially” gaming the system.
“No one likes the situation we’re seeing now,” D’Ambrosio said. “We’ve been told and assured by the market operator that there is more than sufficient power in Victoria available, it’s just not being bid into the market.”
The problem is weighing on the Australian dollar and the pound sterling will await the Bank of England meeting for a potential catalyst to higher prices.
UK employment higher but wages cannot keep inflation pace
The UK saw its latest employment figures increase with 177k jobs added, compared to estimates for 105k jobs.
Despite the gains, real wages were seen falling at their fastest rate in twenty years due to higher inflation. The Office for National Statistics reported that annual growth in pay, excluding bonuses, dropped by 4.5% in April after wages accounted for inflation.
“This is really grim news on pay and is only likely to get worse,” said Tony Wilson, director of the Institute for Employment Studies.
The unemployment rate increased slightly from 3.7% to 3.8% but is still near the lowest rate since the 1970s.
Yael Selfin, economist at KPMG UK, said that the pressure on wages could hurt the UK economy.
“A key question looking ahead will be whether the squeeze on household budgets will result in a lower demand for staff as businesses adjust their hiring needs against the backdrop of weaker activity,” she said.
The rise in employment and unemployment is down to a drop in the number of people who have stepped out of the workforce since the pandemic. Some have retired, while there are many unable to work for health reasons. The ONS said that unemployment in Scotland was currently at a record low of 3.2%.
The pound sterling versus the Australian dollar now awaits the Bank of England monetary policy meeting on Thursday.
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