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Pound Australian Dollar Exchange Rate News: GBP/AUD Slips on Better-than-Expected Australian GDP

December 1, 2021 - Written by John Cameron

Australian Dollar (AUD) Strengthens amid Better-Than-Expected GDP data

The Australian Dollar (AUD) strengthened overnight in response to better-than-expected GDP data.

Although third quarter GDP reported growth contracted from the 0.7% expansion recorded in Q2, it exceeded the forecast of -2.7% and printed at -1.9%.

The contraction in Q3 came as little surprise to AUD investors, after Australia had to reintroduce lockdown measures over the summer amidst a surge in local Covid cases.

Sarah Hunter, chief Australian economist for BIS Oxford Economics, said:

‘Given the backdrop of lockdowns in NSW, Victoria and the ACT, this is an impressively strong performance.

‘This outcome highlights that once restrictions are eased and the virus is under control (either through low case numbers or high vaccination rates), the economy can recover rapidly.

This finding is increasingly being confirmed by the labour market and retail spending data, and it’s likely that there will be a sharp turnaround in GDP in the December quarter.’

Moreover, these better-than-expected figures add to the worries that inflation will increase faster than currently predicted, which may push the Reserve Bank of Australia (RBA) to raise its interest rates earlier than currently planned.

Alongside an improving market mood, rate hikes bets are supporting AUD exchange rates this morning.

Pound (GBP) Stumbles amid Omicron Fears

Meanwhile, the Pound to Australian Dollar (GBP/AUD) exchange rate declined overnight as Omicron concerns mount.

The uncertainty of this new coronavirus variant has triggered international concern and is weighing on the Pound, particularly following Prime Minister, Boris Johnson’s, decision to reinstate certain coronavirus restrictions.

Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics, said:

‘Real-time indicators suggest that the consumer services sector already has been knocked back since the news of the Omicron variant emerged last week.’

GBP is also reeling from November’s housing price figures released this morning which shows an increase of 0.2% from the previous month’s 0.7% to 0.9%, when it had been forecast to decline to 0.5%.

Properties in the UK are now almost 15% more expensive than in March 2020 when the pandemic first began.

Robert Gardner, Nationwide’s chief economist, said:

‘There have been some signs of cooling in housing market activity in recent months. Activity has been extremely buoyant in 2021.

‘[However] it is unclear what impact the new Omicron variant will have on the wider economy.’

GBP/AUD Exchange Rate Forecast: Pound Hindered by Omicron Apprehension

Looking ahead, the Pound to Australian Dollar exchange rate (GBP/AUD) is likely to fluctuate as health experts continue to access the potential threat posed by the Omicron Covid strain.

The uncertainty surrounding the new variant is likely to see investors reassess their expectations for central bank rate hike decisions.

The Pound (GBP) may see further market movement following a speech from Bank of England (BoE) Governor, Andrew Bailey, later this afternoon. Will Bailey strike a move dovish tone in light of the uncertainty posed by Omicron?

In addition, the Australian Dollar may be influenced by the publication of data on Thursday. October’s balance of trade is forecast to drop from AU$12.243B to AU$11B, and October’s finalised retail sales reading is expected to confirm sales growth accelerated from 1.3% to 4.9%.

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