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Pound Australian Dollar Exchange Rate News: GBP/AUD Firms amid Risk-Off Mood

December 3, 2021 - Written by John Cameron

GBP/AUD Firms amid Risk-Off Trade

The Pound to Australian Dollar (GBP/AUD) exchange rate is strengthening on Friday as the Omicron coronavirus variant continues to dampen market mood.

At the time of writing, the GBP/AUD exchange rate is trading at $1.8838 with a market movement of 0.4%.

Australian Dollar (AUD) Subdued amid Omicron-Caused Risk-Off Sentiment

The Australian Dollar (AUD) has slipped since the beginning of today’s European session against GBP.

The riskier ‘Aussie’ is being negatively impacted by the recently-identified coronavirus strain, Omicron, which is causing AUD investors to be cautious.

As Omicron spreads, concern is mounting. This morning, several new cases have been confirmed in New South Wales following the recent easing of lockdown rules in the state.

However, the state will remain open following a statement from New South Wales’ Health Minister, Brad Hazzard.

Hazzard said:

‘Transmission is always a concern but we again need to keep it in perspective. Worldwide there is no clarity around whether this particular variant is going to cause us anywhere near the problems that the earlier variants caused us.’

Australia’s chief medical officer, Paul Kelly, also revealed there’s minimal evidence at present which suggests that bringing booster vaccinations forward will deliver greater levels of protection.

This relaxed approach from Australian leaders is the opposite of the country’s initial reaction to the coronavirus situation.

Moreover, the final manufacturing PMI overshot the initial forecast of 58.5, printing at 59.2. This suggests that the Australian economy is recovering well following the ease of restrictions.

In addition, the Chinese services PMI printed lower-than-expected this week which soured market mood and further hindered the ‘Aussie’s appeal.

Pound (GBP) Weakened by BoE Comments

At the same time, the Pound (GBP) began today’s session by trending upward against the Australian Dollar (AUD) due to the risk-off market sentiment, however has lost ground in response to Bank of England (BoE) policymaker, Michael Saunders’, dovish remarks.

Despite Saunders previous hawkish voting to hike rates last month, today he said that more information is required about Omicron’s economic impact before deciding how to vote.

Saunders said:

”At present, given the new Omicron Covid variant has only been detected quite recently, there could be particular advantages in waiting to see more evidence on its possible effects on public health outcomes and hence on the economy.”

However, Saunders also cautioned against waiting to raise interest rates too long because the BoE’s record low rates may cause tightening in the labour market and increase long-term inflation, also saying:

“This could require a more abrupt and painful policy tightening later. For me, the balance between these considerations is likely to be a key factor at the December meeting."

Saunders’ comments added to the uncertainty whether the BoE will vote to raise interest rates at its December policy meeting.

GBP/AUD Exchange Rate Forecast: GBP and AUD Vulnerable amid Omicron Uncertainties

Looking ahead, the Pound Australian Dollar exchange rate is likely to remain volatile whilst research surrounding the Omicron strain and possible vaccine use continues.

The Pound may struggle amid a lack of notable data scheduled for the beginning of next week, with the UK PMI for construction forecast to print at 54.2, a marginal decrease from the previous 54.6.

On the other hand, the ‘Aussie’ may benefit from the Ai Group Service Index for November, increasing from the previous 47.6 to 53, as well as several announcements from the Reserve Bank of Australia ahead of its interest rate decision on Tuesday

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