The pound-Australian dollar exchange rate experienced high volatility on Thursday, as a variety of factors impacted the currency pair. Early strength with the Australian dollar pulled the exchange rate to a low of 1.7354, which was then followed by a strengthening of the pound, which pushed the exchange rate up to a high of 1.7575.

Australian job data strong but not strong enough for a rate rise

Jobs data for Australia initially impressed, contributing to an early boost in the Australian dollar. Unemployment fell unexpectedly to 5.7% from 5.9% in April, hitting its lowest level since January, while at the same time the employment level also increased for the seventh straight month.Strong jobs data tends to boost a currency strength because it indicates the economy is performing well, corporations are making profits, households are spending, prices are rising and therefore higher interest rates are expected. Interest rates matter because higher rates attract overseas capital looking for better returns, which requires local currency. The increase in demand for the currency then increases its value.

However, the rally in the Aussie dollar was not sustainable as accompanying data also showed that full time positions being created dived to just 11,600 from 73,900 the previous month. The Reserve Bank of Australia has warned that strong full-time employment is needed before any future interest rate hikes can happen and with the number of full time positions being created dropping so dramatically, an interest rate hike looks to be some way off yet. Employment figures which reduce the chance of increasing interest rates will make the currency less attractive.

Impressive retail sales send pound higher

Meanwhile, the pound wasted no time in mounting a recovery, as retail sales that smashed expectations drove the pound and the Australian dollar exchange rate higher. Retail sales figures came in at 2.3%, beating forecasts of 1% and sharply higher than the 1.4% fall the previous month. These impressive figures show that despite the consumer being squeezed due to prices rising and lower wage growth, they are still spending, and this is great news for the UK economy which is so dependent on the consumer. So, the data continues to show a resilient UK economy, despite Brexit, which is positive news for the pound.

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