AUD GBP Moves Higher Ahead of Q3 Growth Data

AUD GBP Moves Higher Ahead of Q3 Growth Data

The AUD GBP exchange rate was higher by 0.35% as Australia awaits growth data for the third quarter. Analysts are expecting a contraction after the recent lockdowns, but traders are now fixated on government reactions to the latest coronavirus variant.

The AUD GBP exchange rate was trading at 0.5350 and could move towards the 0.5280 level this week if the GDP number is weaker.

Australia reverses border reopening, awaits GDP for Q3

Australia has delayed the December 1st reopening of its international borders after the country said it had logged cases of the variant.

“The temporary pause will ensure Australia can gather the information we need to better understand the omicron variant, including the efficacy of the vaccine, the range of illness, including if it may generate more mild symptoms, and the level of transmission,” Prime Minister Scott Morrison said in a statement.

Meanwhile, Australia’s economy is predicted to contract in today’s third quarter GDP gigures after the latest lockdown hit output.

A poll of 24 economists showed the economy contracting by 2.7% during the July-September quarter, with forecasts ranging from -3.8% to -1.9%.

The turnaround would follow the 1.8% and 0.7% growth seen in the previous two quarters before the latest government lockdowns.

“Extended stay-at-home orders in New South Wales and Victoria will have hit consumption, with services spending set to be particularly impacted,” said Felicity Emmett, senior economist at ANZ.

But analysts are hopeful of a sharp rebound for the Aussie economy with ANZ saying:

“The pattern for GDP in the second half of 2021 is certainly rhyming with the middle quarters of 2020 – a sharp decline followed by a large bounce”.

That assumption will depend on the government’s response to the virus variant, where Australia has taken a more heavy-handed approach.

UK government implements new restrictions, HSBC pessimistic on economy

The UK government is expanding its rollout of booster jabs in light of a handful of cases of the new virus variant.

Boosters will now be offered to all over-18s as the government goes into panic mode over a new variant.

Scotland logged six cases and joined Wales with a letter to impose an eight-day quarantine on travellers to the UK, but Boris Johnson refused that request over its effects on the hard-hit travel sector. However, the UK did introduce new testing requirements for entrants to the UK. The UK was said to have 11 cases of the latest variant, which has led to a knee-jerk reaction from many countries.

HSBC analysts were pessimistic about the UK economy, saying:

“The 2022 outlook for the UK economy appears to be challenging, amid an uneven economic recovery, Brexit frictions, and ongoing negotiations regarding the Northern Ireland protocol. These may somewhat explain the persistently low expectations of the UK’s ‘terminal’ interest rate, which makes the GBP vulnerable to a shift towards potentially faster tightening cycle in other G10 currencies, especially the USD.”

“The GBP will probably also face a deteriorating current account deficit when the UK economy normalises.”

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