The pound has crashed sharply against the Australian dollar following the British ministerial resignations yesterday which have rocked the currency markets. Rates for GBP AUD saw a fall of over 2% over the course of the day as events continued to unfold. The loss of a second Brexit secretary in six months under Prime Minister Theresa May is a heavy blow and could mark the turning point for this current Brexit plan. Any developments will continue to shape the direction for GBP to AUD rates. The markets are now starting to prepare for a leadership challenge in the Conservative Party or possibly even a general election which could see further losses for the pound vs Australian dollar.
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The Australian dollar has been boosted following better than expected employment data down under highlighting a thriving jobs market. Full time employment saw additional 42,300 jobs created in October which was substantially higher than the 20,300 recorded in September. Unemployment held steady at 5% arriving better than expected also helping to lift the Aussie dollar.
The healthy numbers follow a report which highlighted that wage growth is finally rising in Australia after a long period of weak growth. This will all be welcome news for the Reserve Bank of Australia (RBA) which is now seeing the benefits having maintained interest rates at record lows of just 1.5% for the last two years. Further wage growth in a tightening labour market and higher inflation will open the door for an interest rate increase in Australia, which is starting to look more likely to happen in 2019. August 2019 appears to be a possible date for that first rate increase to happen. Any signals that the RBA is considering raising interest rates will likely help strengthen the Australian dollar at a time when investors have been moving funds out of AUD and into the USD. The disparity in rates between the US and Australia has been widening and whilst the US are on course for another interest rate increase in December that disparity could begin to close when Australia start raising their interest rates.
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