The Australian Dollar Pound (AUD GBP) exchange rate rallied from a five-week low during the European session on Wednesday as markets were left disappointed by the UK’s latest wage figures.
Pound (GBP) Tumbles as UK Wage Gap Grows
Sterling sentiment slumped late on Wednesday as despite UK unemployment falling to a new 42-year low, the accompanying wage data failed to show any improvement.
According to data released by the Office for National Statistic (ONS), the UK’s jobless rate fell from 4.4% to 4.3% in July, however average earning data showed that wage growth remained at just 2.1% over the same period, missing expectations that it would rise to 2.3%.
With domestic CPI figures surging to a four-year high of 2.9% in August the gap between wages and inflation is growing ever larger, with markets fearing that the growing financial pressure on British households will lead to a slowdown in economic activity, particularly in consumer spending.
Markets were also concerned by suggestions that the lacklustre wage data could possibility delay any chances of a rate hike from the Bank of England (BoE) in the near future as members of the Monetary Policy Committee (MPC) are likely to be reluctant to place an addition burden on consumers.
Andrew Wishart, UK economist for Capital Economics, said;
‘While the continued strength of employment will be welcomed by the MPC, the continued absence of a pick-up in wage growth is likely to keep the doves in the majority.’
Meanwhile the Australian Dollar found some strength yesterday as Westpac’s latest Consumer Sentiment index picked up last month, rising from 95.5 to 97.9 and ending a four-month run of declines.
However despite the rise pessimists continue to outweigh optimists, with Westpac chief economist Bill Evans said the Australian consumer remains ‘downbeat’.
AUD GBP Forecast: BoE to Leave Rates on Hold?
Looking ahead the Pound may slide again Thursday as the BoE concludes its latest monetary policy meeting, with economists now extremely doubtful that the bank will signal plans to raise interest rates in the near future after Wednesday’s poor wage data.
Meanwhile the Australian Dollar may struggle to hold on to its recent gains as economists forecast that Thursday’s employment data will reveal a sharp fall in the number of Australians finding employment in August.
Current Exchange Rates
At the time of writing the AUD GBP exchange rate was trending around 0.6052 and the GBP AUD exchange rate was trending around 1.6519.