GBP/AUD Exchange Rate Trades Level on Mixed UK Stimuli, AUD Tailwinds
The Pound Australian Dollar (GBP/AUD) exchange rate is trading in a narrow range this morning as UK data prints mixed.
The current account deficit in the UK widened sharply to GBP £24.4bn in the third quarter of 2021, while quarterly GDP growth missed forecasts: meanwhile, annual GDP growth exceeded estimates by 0.2%.
At the time of writing, GBP/AUD is trading at A$1.8569, virtually unchanged from today’s opening levels.
Pound (GBP) Resists Downside as Christmas Lockdown Ruled Out
The Pound (GBP) is up against the majority of its peers this morning. Sterling draws support from the fact that UK Prime Minister Boris Johnson ruled out the possibility of imposing Christmas restrictions yesterday, saying that people could go ahead with their Christmas plans but should exercise caution.
Nevertheless, UK data caps GBP gains. The economy grew in Q3 by 1.1% rather than the 1.3% expected, suggesting growth was weakening even before the Omicron variant was detected in Britain.
While household consumption rose by an upwardly revised 2.7% as people returned to the shops, net trade fell, widening the UK’s trade deficit.
Also denting Pound sentiment, the UK’s Covid situation is worsening: Britain reported 90,629 new Covid-19 cases on Tuesday, slightly down from Monday’s all-time high. Boris Johnson has pledged to keep Omicron data under review to see if stricter measures are needed next week.
The UK-EU impasse over the Northern Ireland protocol also weighs upon Sterling: with Lord Frost having resigned from the position of Brexit Minister, UK Foreign Minister Liz Truss is now in charge of negotiations and reports that the country’s position remains unchanged.
Australian Dollar (AUD) Trades Mixed on Uncertain Risk Sentiment
The Australian Dollar (AUD) is trading down against several peers on an unsettled market mood. The benchmark 10-year US Treasury bond yield retreated slightly this morning, indicating weakening risk appetite.
Bearish trading is likely inspired in part by new Covid-related curbs being imposed around the world. In Europe, Germany and Portugal have announced post-Christmas restrictions, while Spain has recorded its highest number of daily cases since the start of the pandemic.
Fortunately, UK government scientists are expected to announce today that the Omicron variant is causing a milder disease than the delta strain in most Britons, limiting downside to risk-sensitive currencies.
Also lending some support to the ‘Aussie’, China’s efforts to support the domestic economy are benefitting AUD as a proxy for the Chinese economy. Developments in China are also fuelling a rally in iron ore, with hopes that steel restrictions will ease seeming to brighten the demand outlook.
Pound Australian Dollar Exchange Rate Forecast: External Factors to Influence Trading?
Given the lack of further significant data this week, the Pound Australian Dollar exchange rate is likely to trade on external factors such as Covid developments and political dynamics.
The UK Prime Minister faces calls to resign as leaked footage shows him celebrating at a party in the midst of lockdown. The resignation of UK Brexit Minister Lord Frost also casts doubt on the current government’s competency.
If political tensions escalate much further, Sterling may face headwinds on reduced public morale.