Mixed Economic Indicators: AUD-USD and EUR-USD Trends

GBPUSD:

The GBP-USD pair has experienced a decline in response to the latest labour market data from the UK, suggesting the possibility of stagflation. Over the three months leading up to July, employment saw a decrease of 207,000 individuals, with the most significant job losses occurring in the sectors of trade, manufacturing, and transport/storage. Concurrently, the unemployment rate edged up by one-tenth of a percentage point to reach 4.3%, aligning with the expectations reflected in surveys conducted by Bloomberg.

On a contrasting note, there was a surprising surge in wage growth in the UK, exceeding consensus forecasts. Total pay increased by 8.5% on a three-month-yearly basis, with the public sector pay hikes playing a leading role in this upward trend. This significant boost in real wage growth is likely to raise concerns at the Bank of England (BoE). HSBC economists anticipate a final 25 basis points interest rate hike at the forthcoming meeting scheduled for September 21st. While this might appear initially positive for the Sterling, it is essential to recognize that the looming risks of diminished economic growth and heightened unemployment could lead to less favourable monetary conditions. Consequently, I anticipate the GBP-USD exchange rate to decline to 1.23 by the end of the year.

EURUSD:

The EUR-USD pair has weakened in response to the deteriorating current situation reflected in Germany's ZEW survey. The September reading plummeted to a bleak -79.4, a significant drop from the previous -71.3, and even worse than the consensus prediction of -75.5. Persistent headwinds, such as surging oil and energy prices, coupled with lacklustre global demand, have contributed to the challenges faced by the German economy. Efforts to bolster the German economy have seemingly fallen short of expectations, exacerbating the situation.

There is a slight glimmer of hope in the fact that the ZEW Sentiment Index inched up to -11.4 from its previous -12.3, defying expectations of a decline to -15.0 as per Bloomberg's consensus. While this development carries a positive note, it's important to note that the readings still remain firmly entrenched in negative territory. Furthermore, all components of the IFO survey of German manufacturers witnessed declines at the close of the preceding month.

Given these ongoing challenges and the persistent weakness in the EUR, we anticipate the EUR-USD exchange rate to reach 1.05 by the end of the year.

AUDUSD:

AUD-USD experienced a slight decline overnight, although it managed to retain a substantial portion of the gains made the previous day. Australian consumers are currently grappling with the effects of a stringent monetary policy. The Westpac Consumer Confidence Index for September tells a tale of pessimism, as it dropped by -1.5% monthly, registering at 79.7 compared to the prior reading of 81.0. This persistent pessimism among Australian consumers lingers, even in the face of reduced concerns about further tightening by the Reserve Bank of Australia (RBA).

There is a somewhat more positive aspect seen in the NAB Business Conditions and Confidence surveys for August. Both surveys indicate modest improvements, offering a glimmer of hope. However, it's important to remain vigilant as tight capacity utilization and ongoing growth in costs and prices will continue to keep the RBA on alert.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.