- Australian unemployment fell to 6.8% in August vs 7.5% in July
- Unemployment improved despite lockdown in Victoria
- Pound (GBP) looks towards BoE interest rate announcement
- No change in policy expected but cold hint to further stimulus in November
The Pound Australian Dollar (GBP/AUD) is pausing for breath after a three-day rally. The pair is on track for weekly gains of over 1% so far, after shedding -3.7% last week. At 08:15 UTC, GBP/AUD trades flat at 1.7746.
The Australian Dollar is holding steady despite unemployment unexpectedly falling, as support from the government and the central bank helped the labour market weather the renewed lockdown in the state of Victoria.
The unemployment rate declined to 6.8% in August, down from 7.5% the previous month and beating expectations of a rise to 7.8%. Employment jumped by 11,000 smashing expectations of a 35,000 loss of jobs.
The data was surprisingly upbeat given that it covers the lockdown period in Melborne to contain a second wave of coronavirus. The government’s JobKeeper employment subsidiary in addition to central bank stimulus has helped cushion the economy from the covid blow whilst aiding its recovery.
The Reserve Bank of Australia had predicted that the unemployment rate would hit 10% by the end of the year. However, analysts now say that an 8.5% unemployment rate is more likely.
The Pound is trading mixed versus its major peers as investors look ahead to the Bank of England monetary policy announcement later today. The central bank is expected to keep monetary policy on hold, with interest rates at record lows of 0.1%.
Instead the central bank is expected to highlight growing risks which the UK economy is facing. Unemployment is set to almost double as the government’s job retention scheme ends in October. A Brexit shock to the economy is also on the cards as the end of the transition period nears and no trade deal has been agreed. Finally, inflation is running at a 4 year low of just 0.2% YoY in August.
These factors provide a good reason for the BoE to pave the way for additional stimulus in the November meeting.