• Australian Dollar (AUD) declines as Australian unemployment hits 7.4%
  • Risk sentiment sours on Chinese consumer concerns and US – Sino tensions
  • Pound (GBP) trades mixed as UK unemployment holds at 3.9%
  • Government furlough scheme clouds jobs picture, more lays offs are coming.

The Pound Australian Dollar (GBP/AUD) exchange rate is trading higher after three consecutive days of losses. The pair settled on Wednesday -0.2% at 1.7953. At 08:30 UTC, GBP/AUD trades +0.1% at 1.7965.

Risk off trading is denting demand for the Australian Dollar and domestic data is also adding pressure. Australia’s unemployment rate jumped to 7.4% in June, the highest level since 1998, with close to one million people officially unemployed. The data showed that the number of people out of work  increased in June, even as coronavirus lockdown restrictions were eased and the economy reopened. The jobless rate had been 7.1% in May.

The jobless rate increased even as 210,800 more people were employed as business started to hire again. This almost offset 264,100 job losses in May.

The broad mood in the market was downbeat, even as China recorded higher than forecast economic growth of 3.2%. Analysts had pencilled in growth of 2.5% for the second quarter. Instead investors paid more attention to retail sales, which declined for a 5th straight month highlighting the caution that shoppers are exercising. Investors fear that the same wariness being seen in Chinese consumers will be mirrored across the globe, undermining the economic recovery.

Rising US – China tensions are adding to risk off trading as the Trump administration pledges to take action in the coming weeks over perceived security threats posed by TikTok and WeChat.

The Pound is pushing higher versus the Australian Dollar but is trading lower versus other major peers following the release of UK jobs data. The unemployment rate is remaining steady at an exceptionally low 3.9%. However, this is because the government’s job retention scheme is clouding the picture. There are 9 million people who are supported by the scheme meaning that they are neither employed nor unemployed.

The unemployment rate will rise as from next month when the furlough scheme begins to taper. The British Chamber of Commerce reported that a third of UK firms plan to lay off staff over the next three months. This is a further sign of the devastating impact that the coronavirus will have on the UK economy.