The GBP AUD exchange rate was higher into the weekend despite lower GDP numbers, but the pair still looks weak as UK virus restrictions are set to be voted into place. There are also calls for the Prime Minister Boris Johnson to step down and that is hurting the pound sterling.
The GBP AUD exchange rate was trading at 1.8500 as the week began with UK employment figures out tomorrow.
Treasurer talks of loosening restrictions to boost economy
Australia must loosen its virus restrictions to boost the economic recovery, Treasurer Josh Frydenberg said on Saturday, even with infections rising to a six-week high.
“States need to keep calm and carry on. And not overreact to the Omicron variant,” Frydenberg told reporters.
Australia is one of the most vaccinated countries, with nearly 90% of people over 16 fully inoculated. However, the country said it had over 1,700 cases in the past 24 hours, up 3% in the last week.
Frydenberg said state and territory leaders must continue with the plan to live with the virus.
“Our economic recovery depends upon it. We have the vaccination rates now at record highs and that has proven to be a vital defence against Covid.”
While some measures have already been eased, interstate and international tourism is still limited.
Australia’s economy was hurt by lockdowns in the two largest states with GDP dropping 1.9% in the third quarter, which was the third worst in history.
Economists and policy makers expect the economy to rebound sharply in 2022 but that will depend on the path taken by the government on the latest cases surge.
Employment and restrictions vote go hand in hand tomorrow
Tomorrow is an ironic day with the latest UK employment figures released, alongside the government vote on new virus restrictions.
The Labour party have said they will vote on the latest curbs put forward by Boris Johnson and that will save him from a revolt in his own party.
Over 60 Tory MPs are pushing back on another round of restrictions with fears of a drift to authoritarianism in the party.
Tory MP Steve Baker said: “It is going to be at least 60 people voting against but of course, it’s a foregone conclusion because our useless opposition in name only will continue to support the government, however authoritarian they are.”
The week ahead sees employment figures tomorrow and inflation released on Wednesday. Both may support an interest rate hike, but traders are looking ahead to further virus variant lockdown damage.
The big event will be Thursday, where the Bank of England will announce their latest interest rate thoughts. Analysts had expected the bank to raise rates in December, but the earliest possibility is now seen as being February of 2022. That meeting also comes with new BoE forecasts and the previously hawkish policymaker Michael Saunders stressed a need to evaluate the effects of the latest variant on the economy.
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