GBP AUD Exchange Rate: The Week Ahead November 14th

The GBP AUD exchange rate was higher on the week after the pound suffered from further unwinding of the rate hike bets. The Bank of England governor reiterated that the bank will “have to act”. A former MPC member was more sceptical and said that investors should take the bank’s views with a pinch of salt. UK economy showed employment was back at pre-virus levels. For the Australian economy there was disappointing jobs data with unemployment surging to 5.2%.

The GBP to AUD was trading at 1.8330 but the threat of the Article 16 trigger is a worry for the pound sterling.

Australia sees surge in unemployment rate after lockdowns

The Australian jobs market showed weakness on Thursday and provides another uphill battle for the country to escape the lockdown damage.

The Australian unemployment rate came in at 5.2% despite expectations of a 4.8% reading. Alongside the loss of 46k jobs it was a blow for Aussie dollar bulls with the market expecting the economy to add 50k jobs despite the lockdown.

Pushing the jobless rate higher was an increase in some states of the number of people looking for work, with the so-called participation rate rising from 64.5% in September to 64.7% last month. The country’s treasurer and the Prime Minister had cheered 13-yr highs in job advertising only a day earlier and now look foolish.

“In contrast, while Victoria’s unemployment also increased, by 29,000 people, employment fell by a further 50,000, with their participation rate falling by 0.4 percentage points,” Bjorn Jarvis, head of labour statistics at the ABS, said, saying that the workforce also remained 113,000 lower than in May.

“It may seem counterintuitive for unemployment to rise as conditions are about to improve,” Jarvis said. “However, this shows how unusual lockdowns are, compared with other economic shocks, in how they limit being able to work and look for work.”

The Australian economy is now reopening but the recovery will have its obstacles.

Weaker GDP growth and Article 16 weigh on pound sterling

The UK economy is near to recovering its pre-pandemic levels of output, latest figures showed.

Official figures showed the economy growing at 1.3% between July and September. That was lower than the 1.5% expected but the economy is closer to pre-virus growth.

The 0.6% growth in September was better than forecast but later numbers will factor in the energy price crisis and the squeeze on household budgets.

Chancellor Rishi Sunak said:

“The economy continues to recover from Covid and thanks to schemes like furlough, the unemployment rate has fallen for eight months in a row, and we’re forecast to have the fastest growth in the G7 this year.”

The week ahead could be volatile as the UK economy sees economic data in the form of employment and inflation. But the real headwind is the government’s stand-off on Article 16 with the European Union.

The European Union has threatened retaliation and has also been in close contact with the US government over the issue. Some are even suggesting the return of the “No Deal Brexit” and that would reignite the pound losses of recent years.