Pound v Australian dollar: Job figures keep GBP afloat against AUD
BETTER-than-expected UK retail sales figures for June have helped push the pound to Australian dollar exchange rate higher today.
The GBP/AUD pairing is currently up half a per cent at AU$1.644, helped by weak Australian jobs data.
UK retail sales were expected to recover from May’s -1.1 per cent on the month fall with growth of 0.4 per cent, but instead increased 0.6 per cent.
This meant year-on-year retail sales were 2.9 per cent higher, compared to forecasts of 2.5 per cent after May’s 0.9 per cent annualised growth.
ONS Senior Statistician Kate Davies said: “Today’s retail sales figures show overall growth.
"A particularly warm June seems to have prompted strong sales in clothing, which has compensated for a decline in food and fuel sales for the month.”
However, overall growth of 1.5 per cent in the second quarter only serves to counterbalance a -1.4 per cent decline during the first quarter of the year.
Ms Davies said: “Looking at the quarterly data, the underlying trend as suggested by the three-month on three-month movement is one of growth, following a fall in quarter 1, suggesting a relatively flat first half of 2017.”
Markets are still focussing on the fact that there are numerous indicators that consumer spending can’t remain at the current level; such as the recent ONS data showing households had sacrificed saving money in order to keep spending.
A strong rate of consumer activity, coupled with weaker inflation, also eases the pressure on the Bank of England (BoE) to raise interest rates, cooling demand for the pound.
GBP/AUD remains firmly in positive territory thanks to the latest Australian employment data, which has shown a smaller number of newly-employed than forecast.
The economy created 14,000 new jobs in June, compared to expectations of 15,000, while the huge rise seen in May was trimmed from 42,000 to 38,000.
June’s unemployment rate therefore not only clocked in at 5.6 per cent as expected, but May’s joblessness figure was also revised to the same level, indicating weaker labour market conditions than had initially been expected.
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Coming just after the Reserve Bank of Australia (RBA) has set a target for interest rates based upon continued economic recovery, signs of backwards movement are particularly disappointing.
More positively, the economy saw another huge swing away from part-time employment towards full-time work, with a drop of -48,000 in the former and a rise of 62,000 recorded for the latter.
This has finally prompted markets to take advantage of the three-and-a-half-month high seen for AUD/GBP following the RBA’s statements earlier this week.
Policymakers estimated that interest rates should be around 3.5 per cent to support a healthy economy, which indicates that eight rate hikes at the usual 0.25 per cent rate should be expected as the economy firms.
Markets may get more information on the interest rate outlook tomorrow thanks to early-morning speeches from the RBA’s Guy Debelle and Michele Bullock.
Meanwhile the pound will respond to the latest UK public sector borrowing figures, which are forecast to show a smaller deficit on the month.