• Pound (GBP) rises as unemployment stays steady at 3.9%, benefit claims surge
  • Australian Dollar (AUD) lost momentum after RBA minutes showed central bank is willing to extend policy support.
  • Australian labour market data in focus, unemployment expected to increase to 7%
  • At 08:15 UTC, Pound Australian Dollar exchange rate (GBP/AUD) trades +0.3% at 1.8260

The Pound Australian Dollar exchange rate is gaining altitude on Tuesday, recovering some losses from the previous session. The pair settled on Monday -0.6% at 1.8217 as market sentiment did a U-turn and improved following further Federal Resserve stimulus.

At 08:15 UTC, GBP/AUD trades +0.3% as it looks to target 1.83 following the minutes from the Reserve Bank of Australia and as the UK unemployment rate unexpectedly remained at multi decade lows.

According to the Office of National Statistics, the UK unemployment stayed pat at 3.9%, defying analyst expectations of a move higher to 4.7%. However, there was a surge in benefit claims for April, which jumped by 528,900, a 50% increase over the 370,000 forecast. Furthermore, the ONS said that indications for May point to payrolls declining by 600,000 in May, compared to March.

The unemployment rate remains very low as the government’s furlough scheme is, to a degree, masking the reality of what is happening. As the government withdraws support in the form of the job retention scheme, unemployment will then be expected to surge in the coming months. Investors focused on the positives, lifting the Pound higher versus the Aussie Dollar.

Looking ahead Pound investors will focus on UK inflation data tomorrow. Analysts are expecting inflation to be flat month on month in May, after falling -0.2% in April.

The Australian Dollar is trading on the back foot even though there were no real surprises in the minutes from the RBA’s latest monetary policy meeting. One of the highlights from the minutes, was that the Board sees the possibility of a shallower coronavirus downturn than initially feared.  However, the central bank also said that the outlook remained highly uncertain.

The Aussie lost momentum following after the minutes also revealed that the RBA  is ready to extend policy support for as long as required after highlighting the risks of covid-19 on the domestic economy.

Investors will now look ahead to the closely monitored jobs report. Analysts are expecting unemployment to tick higher to 7% in May, up from 6.2%, meanwhile payrolls are expected to decline by 125,00, a vast improvement on April’s 594,300 decline. A stronger reading could boost  the Aussie Dollar.