The Australian dollar has made further movement against the pound after Australian unemployment data for June held steady. Unemployment remains stable at 5.2% whilst the data also recorded 21,000 new jobs being created putting a positive spin on the Aussie. Whilst the numbers are positive at this time some of the indicators in the report suggest that there could be a slowdown in employment in the months ahead.
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The Reserve Bank of Australia (RBA) have a target of 4.5% so there is still some way to go especially if the rate of unemployment does inch higher. It could mean a more aggressive stance from the RBA going forward which could affect the Australian dollar. The unemployment data this time round may not be weak enough to warrant a third interest rate cut so soon after two back to back cuts in June and July, but it could raise the prospect of cuts further down the line.
The RBA now must balance a perceived cooling economy combined with the weaker global growth outlook and the slowdown in China, Australia’s largest export market. After the decisive action taken by the RBA having made two consecutive rate cuts the central bank is unlikely to move again at the August meeting.
The chance of a cut begins to increase in September with the expectation that one will be made between September and December 2019. The central bank could elect to cut by a total of 50 basis points but this could depend on the economic data from Australia in the months ahead.
As such the Australian dollar is likely to be impacted by the strength of the economy. Any signals of further rate cuts by the RBA would likely affect the Australian dollar.
The AUD/GBP pair has seen movement in recent weeks although this is more down to sterling’s poor run of performance surrounding Brexit with a new incoming Prime Minister next week. Those with pending requirements either buying or selling Australian dollars may wish to plan around this important political change in the UK.
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