Pound Australian Dollar exchange rate Rises despite UK Omicron Fears
(Updated 17:15, 09/12/2021) The Pound Australian Dollar (GBP/AUD) exchange rate climbed through this afternoon despite persistent UK headwinds over the country’s new Covid restrictions.
According the Guardian, economists and investors now believe the UK central bank is more inclined to leave borrowing costs at 0.1% on 16th December, as the new Covid variant complicates the economic outlook ahead.
According to Martin Beck, chief economic advisor to the EY ITEM Club:
‘The immediate and direct effect of the new variant’s discovery – a fall in oil and other commodity prices – means the forces affecting inflation are no longer all pointing upwards, and the variant poses numerous other challenges for the economic recovery.’
Nevertheless, Sterling found support against several peers as risk-off flows sapped demand from risk-sensitive currencies such as the Australian Dollar.
As various experts discuss the efficacy of vaccines at providing protection from the Covid variant, there are concerns that speeding up booster jabs in Britain may increase vaccine inequality elsewhere in the world, in regions where healthcare professionals are struggling to administer first jabs on a scarcity of resources.
Original article continues below:
GBP/AUD Exchange Rate Wavers on UK Plan B, Risk-Off Headwinds
The Pound Australian Dollar (GBP/AUD) exchange rate is fluctuating this morning as Sterling comes under pressure from new UK Covid restrictions, while the ‘Aussie’ faces downside over weakening risk sentiment.
At the time of writing, GBP/AUD is trading at A$1.8453, up slightly from today’s opening levels.
Pound (GBP) Range-bound on Covid Plan B Measures
The Pound (GBP) is trading in a mixed range today following the implementation of the UK’s Plan B. Under new Covid rules, face masks will be required in certain settings, people will be advised to work from home and visitors to nightclubs and other large venues will be required to show an NHS Covid pass.
Feelings are mixed over the new measures, with several of the Prime Minister’s own party calling the plan untimely and ‘a diversion’ from allegations Boris Johnson is currently facing over a private party reportedly held last year when such gatherings were banned.
Johnson has denied accusations, remarking that:
‘The British public … can see the vital importance of the medical information that we are giving and can see the need to take it to heart and to act upon it. You have got to act to protect public health when you have clear evidence.’
In the scientific community, evidence so far suggests that the Omicron variant is more contagious than the previous Delta strain; new data from Pfizer/BioNTech shows that three doses of their vaccine are likely to protect against Omicron, but two doses may not.
Australian Dollar (AUD) Struggles on Mixed Market Mood
The Australian Dollar (AUD) is trading down against several peers this morning as tepid market sentiment weighs upon risk-sensitive currencies.
Not only are cases of the Omicron variant rapidly accelerating, but renewed geopolitical tensions between the US and Iran likewise inspire bearish trading. US and Israeli chiefs are expected to discuss possible military exercises tomorrow, which would prepare for a worst-case scenario to destroy Iran’s nuclear facilities.
The USA’s relationship with China is also exerting headwinds, as the US House passes a bill to punish the country’s oppression of Uyghur Muslims. China’s foreign ministry has warned that America, along with Britain and Australia, will ‘pay a price’ for their decision to boycott the Beijing winter Olympics.
Also weighing upon AUD, inflation in China reached its highest rate since August 2020, due to seasonal rising demand, supply constraints, and sporadic Covid-19 outbreaks. In response to the release, Asian shares have fallen, with Chinese benchmarks leading the decline.
GBP/AUD Exchange Rate Forecast: UK GDP to Exert Further Headwinds?
UK GDP is expected to reveal a fall tomorrow for the month of October: a decrease in production output would likely indicate coronavirus-related supply problems.
Elsewhere, UK industrial production is expected to have increased, potentially buoying Sterling sentiment. A lack of Australian data will leave the ‘Aussie’ to trend on risk sentiment and external factors – further Omicron updates may influence Pound Australian Dollar trading.