The pound declined against the Aussie yesterday following the Bank of England’s decision to maintain the benchmark interest rate unchanged at a 15-year high. The overwhelmingly positive Australian employment data for November also fueled the pound’s sell-off. Overall, the GBP/AUD pair declined from a high of 1.9220 to a low of 1.8790 in the past 24 hours.
According to the Australian Bureau of Statistics (ABS), the country’s economy added 61,500 jobs in November, following an addition of 42,700 jobs in October, and blew away forecasts of 10,600 job additions.
As a result, the number of employed people rose to 14,257,500 in November from 14,196,000. Also, the number of unemployed people grew to 572,000 from 553,200.
While the participation rate grew to 67.20% from 67% in November, the employment-to-population ratio inched up to 64.60%. The underemployment rate increased to 6.50% from 6.30%.
Additionally, full-time employment rose by 57,000 to 9,905,900 people. Likewise, part-time employment grew by 4,500 to 4,351,600 people.
The ABS also stated that the unemployment rate inched up to 3.90% in November from 3.80% in October. The reported figure is a notch higher than forecasts of 3.80%.
In the European session, the Bank of England announced its decision to maintain benchmark interest rates at 5.25%. Notably, the market is increasingly betting on a series of rate cuts next year.
In accordance with the meeting minutes disclosed yesterday, the Monetary Policy Committee, for the third successive session, voted 6-3 to retain the benchmark interest rate. The voting pattern stood unchanged from the previous November meeting, with three members advocating for a rate hike. The committee reaffirmed its directive that benchmark interest rates should remain “sufficiently restrictive for sufficiently long” to address inflationary-related worries. This posture sharply contrasts with that of the US Federal Reserve, suggesting that US policymakers are looking at the option of slashing interest rates in the coming year.
Regarding economic growth, the Bank of England (BOE) currently anticipates a stagnant GDP in the fourth quarter of 2023, following a contraction in October. This marks a downward adjustment from the 0.1% quarterly growth projected in the BOE’s November forecasts.
The central bank also stated that the positive impact of Hunt’s Autumn Statement, encompassing a tax reduction for workers and permanent full expensing for businesses, is anticipated to deliver a 0.25% boost to GDP in the upcoming years, simultaneously impacting supply dynamics.
Chancellor of the Exchequer Jeremy Hunt stated, “We have reached a turning point in our efforts to fight inflation, and real wages are on the rise. Nevertheless, it is imperative that we persist in negating inflationary pressures within the economy to achieve our 2% target.”
The decision to maintain the interest rate is expected to keep the GBP/AUD pair range-bound with a slight bearish bias in the near term.
Technically, the GBP/AUD pair is declining after facing resistance at 1.9220. The next support is anticipated only near 1.8490. Additionally, the currency pair is trading below its 50-day moving average, while the MACD indicator is showing a negative reading. Therefore, we anticipate the GBP/AUD pair to remain in a downtrend in the near term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
