GBP/AUD scales 38-month peak as strong pay growth adds to BoE pressure

Key points

The British Pound rose to a fresh 38-month high against the Australian Dollar on Tuesday, as higher-than-expected wage growth in the UK mounted more pressure on the Bank of England to continue hiking interest rates.

Regular payment which excludes bonuses in the United Kingdom increased 7.3% year-on-year to GBP 607 per week over the three months to May, data by the Office for National Statistics showed earlier on Tuesday. It has been the highest wage growth since the April-June 2021 period.

In the UK private sector, pay excluding bonuses rose 7.7% YoY, or the highest growth outside of the COVID-19 pandemic.

Meanwhile, the rate of unemployment in the country went up to 4.0% over the March to May period, while reaching the highest level since Q4 of 2021. The rate stood at 3.8% over the three months to April.

The number of unemployed persons in the UK surged by 77,000 to 1.37 million, mainly because of people unemployed for up to 12 months, the ONS said.

The number of employed persons surged by 102,000 to 33.05 million in March to May, mostly driven by part-time employment.

In other data, a National Australia Bank gauge of business sentiment for Australia was reported at a reading of 0 in June, up from a revised down -3 in May and also exceeding market expectations of -1.

“We continue to see warning signs in the survey about the outlook for growth but as of June firms were yet to see a real deterioration,” NAB chief economist Alan Oster commented.

As of 9:12 GMT on Tuesday GBP/AUD was edging up 0.51% to trade at 1.9347. Earlier in the European session, the minor Forex pair went up as high as 1.9349. The latter has been the pair’s strongest level since May 6th 2020 (1.9376).