Pound Australian Dollar (GBP/AUD) Exchange Rate Muted amid Omicron Lockdown Threat
The Pound Australian Dollar (GBP/AUD) exchange rate is stuck in a narrow range so far this morning amidst fears England faces a possible lockdown after Christmas.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8589, virtually unchanged from this morning’s opening levels.
Pound (GBP) Muted amid Uncertainty over UK Restrictions
The Pound (GBP) is trading sideways against the Australian Dollar (AUD) and the majority of its other peers this morning, as GBP investors remain wary of the possibility of the UK government imposing further Covid restrictions.
Following a meeting of his cabinet on Monday, Prime Minister Boris Johnson appeared to indicate that no new restrictions will be imposed before Christmas, suggesting that the arguments for stricter measures are ‘finely balanced’ and helping to cap Sterling’s losses yesterday.
Sources suggest the government is leaning towards implementing a two-week ‘circuit breaker’ lockdown just after Christmas.
However, the PM also said that the government has ‘to reserve the possibility of taking further action to protect the public’ before Christmas, and claimed that data regarding the spread of the Omicron variant is being monitored ‘hour by hour’.
The uncertainty over what and when restrictions might be implemented is causing a major headache for businesses in England however, and is continuing to limit the upside potential of the Pound this morning.
Business leaders have warned that many firms are ‘in limbo’ as they are unsure whether they should cancel New Year’s events and that many are already struggling due to low consumer confidence.
The Confederation of British Industry (CBI) will publish its latest distributive trades index later this morning, which could further dampen GBP exchange rates if it confirms that the ‘Plan B’ measures imposed earlier this month have already significantly impact retail activity.
Australian Dollar (AUD) Steady Following RBA Minutes
At the same time, the Australian Dollar (AUD) is also flat this morning, following the publication of the minutes from the Reserve Bank of Australia’s (RBA) December policy meeting.
The minutes triggered some AUD selling pressure in overnight trade as they revealed that the RBA remains committed to leaving interest rates at a record low of 0.1%, although it also indicated the bank is open to accelerating the winding up of its bond purchases.
The appeal of the ‘Aussie’ was further limited by a bearish market mood, after the World Health Organization (WHO) warned more steps must be taken to prevent the spread of Omicron.
Pound Australian Dollar Forecast: Brexit Uncertainty Also Poses a Risk to Sterling
Looking ahead, the Pound Australian Dollar exchange rate could be pressured by renewed Brexit uncertainty as UK Foreign Secretary Liz Truss is set to speak with European Commission Vice-President Maroš Šefčovič later today.
Truss has said she wishes to negotiate ‘a comprehensive solution’ regarding the Northern Ireland protocol, but is unclear as to what this might entail.
Should she pursue a similarly antagonistic approach to negotiations as her predecessor David Frost then the Pound may weaken.
Meanwhile, in the absence of any notable data releases, the direction of the Australian Dollar is likely to be dictated by market sentiment, potentially leaving the ‘Aussie’ vulnerable if a cautious mood prevails.