Pound Australian Dollar (GBP/AUD) Exchange Rate Turns Down as Risk Appetite Improves

GBP/AUD Exchange Rate Slides as Omicron Concerns Threaten UK’s NHS

(Updated 16:00, 05/01/2022) The Pound Australian Dollar (GBP/AUD) exchange rate fell in the second half of today’s session as risk sentiment turned bullish and worries over pressure on the NHS deepened.

Markets embraced a risk-on mood amidst a weaker US Dollar – US bond yields remain below Tuesday’s top. Also boosting risk sentiment were unusually hawkish comments from central bank officials.

The European Central Bank (ECB)’s Martins Kazaks (the Lithuanian central bank head) warned that if the inflation outlook picks up, the ECB is ready to raise rates and cut stimulus – several ECB members have warned of upside risks to the bank’s 2023 forecast in recent weeks.

Meanwhile, concerns mounted in the UK as officials warned of an NHS crisis. Pat Cullen, general secretary of the Royal College of Nursing, said: ‘This is not hysteria, this is blowing the whistle on falling standards as patient care comes under real threat.’

Matthew Taylor, chief executive of the NHS Confederation, echoed Cullen’s statement, saying the government’s attempt to reassure the public that the NHS is not being overwhelmed ‘does not chime with experiences of staff up and down the country.’

Original article continues below:

Pound Australian Dollar Exchange Rate Wavers on Lack of UK Data

The Pound Australian Dollar (GBP/AUD) exchange rate is range-bound this morning, trading below yesterday’s midday highs. A risk-off mood subdues the Australian Dollar (AUD), while Pound (GBP) gains are capped by a lack of significant data.

At the time of writing, GBP/AUD is trading at A$1.8680, virtually unchanged from today’s opening levels.

Pound (GBP) Enjoys Tailwinds on Omicron Optimism

The Pound (GBP) is benefitting from today’s bearish market mood against its perceived risk-sensitive peers. Also supporting Sterling is continuing optimism that the Omicron Covid-19 variant won’t derail the UK economy.

Members of Parliament are returning to Westminster today: keen to avoid a cabinet split, Prime Minister Boris Johnson has already announced that he is rejecting calls to abandon Plan B Covid restrictions and introduce further lockdown measures.

Despite a record 218,724 cases in England and Scotland, Mr Johnson struck an upbeat tone:

‘We have a chance to ride out this Omicron wave without shutting down our country once again. We can keep our schools and our businesses open, and we can find a way to live with this virus.’

Nevertheless, the pressure already put upon the NHS tempers optimism, as four more NHS trusts – all outside London – declared critical incidents yesterday.

Professor Chris Whitty, England’s chief medical adviser, said the NHS faced ‘very substantial pressure over the next couple of weeks’ as medics and scientists call for restrictions beyond home-working and mask mandates in shops and on public transport.

Australian Dollar (AUD) Fluctuates as RBA Chart Pack is Released

The Australian Dollar (AUD) is trending in a mixed range following the release of the Reserve Bank of Australia (RBA)’s chart pack.

The pack presented a mixed picture, revealing that Australian employees had missed out on any meaningful wage growth between now and 1997.

Meanwhile, mining activity has increased and high bulk commodity prices – namely, coal – continue to bolster the ‘Aussie’ despite the unsustainability of the industry.

Elsewhere, Australian citizens are struggling to get hold of rapid antigens tests as the Omicron variant wreaks havoc – Australian cases of coronavirus are now totalling over 25,000 per day.

Anxiety over Covid test shortages suppress AUD trading sentiment alongside new measures limiting the number of people able to received PCR test for free. Many have accused the Australian Prime Minister Scott Morrison of ‘price-gouging’: critics say the new guidelines further disadvantage those on lower incomes, leaving them more exposed as the virus spreads.

GBP/AUD Exchange Rate Forecast: AU PMI Data to Influence Trading?

Looking ahead, Australia will publish its finalised services PMI this evening for the month of December. The data is expected to confirm a slowdown in service-sector growth.

Further risk-off headwinds are also likely to subdue AUD, buoying the Pound Australian Dollar exchange rate.

Meanwhile, a lack of UK data could expose the Pound to losses as UK Covid sentiment remains mixed.

Olivia Evershed

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