Aussie dollar tipped to be stronger against British pound

A customer counts his Australian dollar banknotes at an exchange office in downtown Cairo, Egypt, April 19, 2016. Reuters/Amr Abdallah Dalsh

The Aussie dollar is tipped to become stronger against the British pound this week in the wake of the UK election result. Shane Oliver, AMP Capital's chief economist, forecasts the local market to lift to 21 points when it reopens after the public holiday.

"My feeling will be that we are probably on track for a rise in the market on Tuesday when it reopens," Sydney Morning Herald quotes Oliver as saying. He said he sees no economic data that will rock markets on Monday, which means a greater likelihood of a gain.

On Friday, the Aussie market share ended higher. It was strengthened by mining stocks, while the unfavourable showing for the Conservative Party in the UK election gave the Australian dollar a 2.5 percent lift against the British pound.

The ASX 200 as well as the broader All Ordinaries index were flat between 0.01 and 0.02 percent, finishing last week’s trade at 5677.8 points and 5715.5 points respectively. The local market will not operate on Monday for Queen Elizabeth’s birthday, which is a public holiday.

Attention will be focused on the US Federal Reserve meeting slated this week. Interest rates are expected to hike for the fourth time since last year. Oliver said it is something that should not come as a surprise for the market, adding there is a 95 percent probability of a rise. He added investors will be paying attention to the Federal Reserve, which is expected to argue the US economy continues to improve amid the increasing rates.

In Australia, the Australian Bureau of Statistics employment figures will draw attention this week. At least 10,000 new jobs are likely to be announced.

According to Oliver, that is a little slowdown after strong numbers of jobs in the past two months. He forecasted a 5.7 percent unemployment rate. But he said that ANZ job advertisement figures and employment plans point to fairly solid job growth. Oliver added the underemployment figure will draw interest given latest economic data has been on the "soft side.”

The figure is expected to remain at about 9 percent. "Even though there is a bit of a risk given the volatility in this data, we would be dangerous to read too much into it,” he said.

Finally, Oliver explained the problem in the country has not been overall employment numbers but has been under employment figures. He said people are getting part-time jobs when they want full-time jobs.

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