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GBP/AUD advances after UK, Australia econ data

It has been a busy day for both the Pound and the Australian dollar.

The GBP/AUD cross rose half a percent during the London session, last seen trading at around 1.8350 and trying to settle above its 200-day moving average.

Australian data disappoint

The Australian employment change improved to -46,300 in October, up from -138,000 previously , but it was much worse than 50,000 new jobs created. The unemployment rate worsened drastically to 5.2%, up from 4.6%. It looks like the COVID restrictions and never-ending lockdowns and surveillance are hurting the economy more than expected.

The softer than expected employment report for October supports the RBA’s latest guidance that it is still not planning to begin rate hikes until at least 2023 at the earliest. We still believe that risks remain skewed to the downside for the Australian dollar, economists at MUFG Bank said in a note today.

UK data also miss forecasts

The UK GDP for the third quarter declined to 6.6% annualized, down from 23.6% in the second quarter and weaker than the 6.8% forecast by economists. The quarterly GDP change slowed to 1.3% from 5.5% in Q2.

Additionally, **industrial production for September fell to -0.4% from 0.8%, and manufacturing production slowed to just 0.1%, down from 0.5% previously. **

A slowing macro environment and relatively contained inflation expectations point towards a less aggressive rate cycle. The Bank of England failed to pull the rate trigger in November. Instead, we expect rates to be hiked by 15bps in February, reversing the March 2020 emergency cut, Economists at CIBC Capital Markets noted on Thursday.

US inflation coming in hot

From other news, the US Consumer Price Index (CPI) jumped 6.2% from a year ago, the most since 1990 . The monthly increase was 0.9%. Both were above analysts’ estimates.

The core rate, which excludes volatile food and energy prices, rose 4.6% year-over-year, also the most in more than 30 years. The rise from September was 0.6%. The dollar strengthened notably after the release, sending the dollar index above 95.0 for the first time since July 2020.

However, the AUD/USD pair continued to decline today after weaker-than-expected domestic labor market data. In contrast, the GBP/USD pair traded marginally higher, resulting in a bullish day for the GBP/AUD cross.

Technically speaking, the Pound dropped to fresh yearly lows against the dollar as the GBP/USD pair fell below 1.34. However, as long as it remains below 1.36, the medium-term downtrend remains intact, targeting 1.32.

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