The GBP AUD exchange rate started the year 0.20% higher at 1.8650 as the pair tried to escape a tight trading range from December. The Australian and UK economies are both experiencing high record high virus case numbers and that could weigh on the exchange rate with little economic data ahead.
The GBP to AUD trades has resistance above the 1.8800 level with only RBA charting data released on Wednesday.
Australia bracing for higher cases into late-January
South Australia’s state premier, Steven Marshall, has warned that case numbers in the country could continue to rise, with the peak expected in late-January.
“We still haven’t got anywhere near the peak in our state. We are seeing large surges in other parts of the world, in other parts of the country,” Mr Marshall said.
“We don’t have a projection in terms of the numbers, but we do have forecasting which will be coming back to us towards the end of the week in regards to what that peak date is likely to be.”
“I believe it will certainly be before the end of January.”
But the premier then said that, “nobody has a crystal ball.”
The Australian government used to be trigger happy on lockdowns, but with a high vaccination rate, they are allowing the country a chance to remain open for business.
The UK is also seeing high case numbers, and although the latest variant is milder, high numbers of healthcare staff are testing positive and having to isolate. That could lead to a staffing problem for the country’s hospitals.
Meanwhile, Australian dollar traders are betting on three interest rate rises in the year ahead. That won’t please the bank’s Governor, Philip Lowe, who still says that 2024 will be the year for a rate hike. The RBA and the Australian treasurer have both said that the virus variant will not derail the economy, which would give a higher chance of the traders being right.
Boris Johnson to delay next virus announcement
Boris Johnson is set to delay the next announcement on virus restrictions until ministers have studied the effects of Christmas mixing, it has been reported.
Downing Street will review the current Plan B measures on Wednesday, when parliament returns from its holiday recess. But ministers have said over the weekend that changes to the rules, either removing Plan B measures or adding tougher restrictions like those in Scotland, Wales and Northern Ireland, are unlikely.
On the UK interest rate picture, a top economist has accused the Bank of England of ‘dithering’ over rate hikes.
Andrew Sentance, who was on the bank’s Monetary Policy Committee until 2011, plans to push for an investigation into its role in raising rates and guarding against inflation.
“A lot has gone wrong over the last ten to 15 years in the sense that the MPC has been very dormant. It hasn’t done very much. It’s been very reluctant to act.”
“The personalities that have been appointed don’t seem to have been very strong and willing to challenge,” he said.
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