The GBP AUD exchange rate was 0.70% lower after the release of RBA meeting minutes and UK employment. The figures were an improvement on forecasts, but the pace of real wages showed the fastest decline on record. The RBA took a bullish tone on rates, boosting the Australian dollar.
The GBP to AUD rate is trading at 1.7420. It moved closer to April lows of 1.7300.
Aussie dollar gains on hawkish rate tone from RBA
The latest RBA meeting minutes showed a hawkish approach to interest rates, keeping a bid under the Australian dollar yesterday. Members observed that inflation in the country increased substantially and was anticipated to further increase in the “near term” according to the RBA minutes. While inflation is forecast to peak later this year and fall back towards the 2 to 3 per cent range next year, it will likely “moderate” as global supply problems ease and commodity prices stabilise (even if at an elevated level). Higher interest rates will achieve a more sustainable balance between the demand for and the supply of goods and services.
The minutes hint at further policy action toward the end of the year, which will help curb excesses in markets and assist in the decline of inflation back to the bank’s target range.
Employment will help convince the bank that rate hikes are the right course, with the minutes adding that the economy’s resilience rested in the labour market as it grew substantially in the months before. The country’s unemployment rate is at a “multi-decade low”.
UK jobs market sees improvement, but real wages suffer
The UK economy also showed resilience in the employment market with job figures that were better than analysts had expected.
However, the pound sterling suffered as real pay fell by 2.8% in the three-month period, which was the sixth-straight loss and the worst since records began in 2001. The data from the ONS on Tuesday showed a 296,000 gain in workers, which is the most significant increase for a year. The rate of employment held firm at 3.8%, following fears of a move higher to 3.9%.
There are fears that the problem will continue before inflation tops out in the UK, which the BoE said would be around 10%. The Bank of England will likely hike interest rates by another 50bps at their next meeting.
The latest ONS statement said that today’s figures indicate a “mixed picture” for the job market. With very high demand, unemployment fell once again. Meanwhile, employment increased with a record low for redundancies.
“Following recent increases in inflation, pay is now clearly falling in real terms, both including and excluding bonuses,” the statistics office said.
The UK will see its latest inflation figures released tomorrow with expectations for a rise to 9.3% Year-over-Year.
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