GBP/AUD Inches Up on Australian Wages, Sentiment Data

GBP/AUD is slightly up in early trading on Wednesday. Though, the pair has shown no clear direction since Monday when it surged on the UK GDP data.

Currently, one British pound buys 1.8773 Australian dollars, up 0.03% as of 4:36 AM UTC.

The Aussie is under pressure amid gloomier sentiment of Australian consumers and US President Donald Trump’s warning of more tariffs. Yesterday, Trump said that he was close to ink a “phase one” trade deal, though if it fails, the US will increase tariffs. Speaking at the Economic Club of New York, he said:

“If we don’t make a deal, we’re going to substantially raise those tariffs. They’re going to be raised very substantially. And that’s going to be true for other countries that mistreat us too.”

Australia’s Sentiment and Wages Call for More Stimulus

The wage growth in Australia weakened last quarter while consumer sentiment stays gloomy in November, signalling needs for more stimulus from the Reserve Bank of Australia (RBA).

Earlier today, the Australian Bureau of Statistics (ABS) said that the wage price index added 0.5% in the quarter that ended September, in line with analysts’ expectations but below the 0.6% growth in the June quarter.

Annual wage growth came at 2.2%, down from 2.3%, while economists expected no change.

Elsewhere, consumer sentiment continues to be below average even after three interest rate cuts since June. A survey from the Melbourne Institute and Westpac Bank showed that sentiment slightly rebounded in November, but pessimists outnumber optimists.

The RBA might be forced to cut its interest rate to a record low of 0.75% as the weak wage growth and gloomy consumers put pressure on consumption.

Callam Pickering, an economist at job site Indeed, commented:

“Wage growth remains one of the key challenges for the Australian economy. It is the key for household spending, inflation and monetary policy.”

RBA Governor Philip Lowe has said on several occasions that wage growth above 3% was needed to face the inflation pressure. Nevertheless, the central bank said last week that it expected a 2.3% pace by the end of 2021.

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