Forex Jobs Matchup: United Kingdom vs. Australia

Both the United Kingdom and Australia printed weaker than expected headline jobs figures this week, but only one currency can claim victory in this forex rivalry. Which one will it be? Let’s take a closer look at their September employment reports and their underlying components to find out:

United Kingdom

  • Sept claimant count change: +4.6K vs. -2.3K consensus, +1.2K previous
  • Unemployment rate fell from 5.5% to 5.4%
  • Average earnings index up from 2.9% to 3.0%, short of 3.1% consensus

In the blue corner, we’ve got the Brits recording a 4.6K increase in jobless claimants for September while still managing to bring the unemployment rate down from 5.5% to 5.4% -its lowest reading in seven years. To top it off, the overall employment rate, which accounts for the share of the working-age population with jobs, jumped to 73.6% – its highest level since records began in 1971.

Although the average earnings index barely missed expectations of a 3.1% gain, the 3.0% growth in pay including bonuses still marks a healthy rise in wage inflation relative to consumer price levels, which suggests upbeat prospects for financial confidence and spending. Total hours worked over the three-month period ending in August chalked up a 0.1% uptick from the March-May period, reflecting upward pressure on labor demand.

GBP/USD 15-min Forex Chart

GBP/USD 15-min Forex Chart

With that, Cable had a bullish forex reaction to the report, sustaining its rally until the U.S. trading session as I predicted in my Forex Trading Guide. Of course the pair also had a bit of help from the bleak U.S. retail sales release, but it’s still worth noting that the U.K. jobs report had plenty of positive points.

Australia

  • Sept employment change: -5.1K vs. +7.2K consensus, 18.1K previous
  • Unemployment rate held steady at 6.2% as expected
  • Seasonally adjusted labor force participation rate dipped from 65% to 64.9%

Fighting from the red corner, we’ve got the Aussies showing a 5.1K drop in employment for September, marking its first monthly decline since April this year. While the unemployment rate managed to hold steady at 6.2%, this was mostly a result of the seasonally adjusted participation rate ticking down from 65% to 64.9% as some Australians exited the labor force and gave up on their job hunt.

On a more positive note, the total number of hours worked posted another monthly gain, which suggests a likely increase in take-home pay from overtime and rising labor demand, potentially translating to more hiring later on. Keep in mind, however, that the Australian labor market might still have to deal with weaker business production later on since shipments to its top trading partner China have slowed down.

Now if you’re looking for a forex pair to trade based on these jobs figures, then you might wanna consider a long position on GBP/AUD, as the pair has recently broken above a descending trend line and appears to be making a pullback.

GBP/AUD 1-hour Forex Chart

GBP/AUD 1-hour Forex Chart

Do you think it makes sense to pair the British pound with the Australian dollar as a strong currency versus a weak one? Or are the jobs figures not enough to support a bullish fundamental bias for this matchup? Don’t be shy to share your thoughts below!