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Pound Australian Dollar Exchange Rate Muted as Omicron Worries Continue

December 20, 2021 - Written by John Cameron

GBP/AUD Exchange Rate Trends Sideways as Omicron Variant Weighs Heavily on Pound
The Pound Australian Dollar (GBP/AUD) exchange rate rose overnight but has fallen today, as the Omicron variant weighs heavily on the Pound (GBP). A strengthened Australian Dollar may also have scuppered the currency pair’s chances for any upward movement.
At time of writing the GBP/AUD is at around $1.8565, which is largely unchanged from this morning’s opening figures.

Pound (GBP) Falls amid Rumours of ‘Plan C’ Restrictions and Omicron Fears

The Pound has fallen against its rivals today as reports suggest that further restrictions may be on the horizon in order to combat the Omicron variant.

UK health minister Sajid Javid as made it clear that fresh restrictions before Christmas could be imposed within a matter of days, with further rumours of a ‘circuit-breaker’ lockdown coming immediately after Christmas. Businesses have accused the government of imposing a ‘lockdown by stealth’ as Oxford Street saw its footfall this weekend at 17 % below pre-pandemic levels.

Should the UK government introduce new restrictions it’s likely the Pound will fall further. Confidence in the currency could be regained should Chancellor Rishi Sunak announce further measures to supports struggling businesses.

Jac Tyrell, chief executive of the New West End Company, echoed the frustration felt by many of the country’s businesses:

‘With less than five days to go until Christmas day and the probabilities of a circuit-breaker lockdown increasingly on the horizon, the retail and leisure sector is now facing a huge amount of financial uncertainty when it should be enjoying a much needed shot in the arm.’

Sterling may face Brexit headwinds again today following the shock resignation of lead Brexit negotiator David Frost this weekend. Frost had previously been leading the UK’s negotiations with the EU regarding the Northern Ireland Protocol, and recent reports had indicated some progress had been made. With Liz Truss set to step in to fill the role, the Pound could see further downward movement should the negotiations become unproductive.

Australian Dollar (AUD) Rises as Country Opens Up Despite Soaring Covid-19 Cases

The Australian Dollar (AUD) has climbed against its riskier rivals today despite fears that Omicron variant may hamper the country’s recent rebound.

Positive private sector and employment data from last week had strengthened hopes that the country would see a post-lockdown boost after removing the last of its major Covid-19 restrictions. Consumer fears regarding the Omicron variant and surging Covid-19 cases may dampen those expectations and cause a dip in the Australian Dollar.

The Australian government finds itself in a difficult position, as businesses implore the government to continue with reopening the country despite the rise in Covid-19 cases. Jennifer Westacott, chief executive of the Business Council of Australia, had the following to say on the matter:

Locking in a strong recovery will mean sticking to the plan to reopen, managing the supply constraints that are putting a handbrake on the recovery and tearing down Fortress Australia. We have to continue reducing the economic friction that makes it hard to do new things.’

The ‘Aussie’ may also have seen a boost today from rising iron ore prices and a weakened Chinese Yuan (CNY).

GBP/AUD Exchange Rate Forecast: Will UK’s Growth Struggle Under Weight of Omicron?

Looking to the week ahead, the final reading of the UK’s GDP growth figures for the third quarter are currently forecast to show a further slowdown. This comes after the Bank of England (BoE) slashed its growth forecasts for December and 2022 last week in the face of the Omicron variant. Thursday’s consumer confidence figures are also forecast to show a fall after a slight recovery last month, and should both data sets print as expected then it could push the Pound further down.

For the Australian Dollar, significant data comes in the form of multiple releases from the Reserve Bank of Australia (RBA). Investors will likely dissect today’s mid-year economic outlook and Tuesday’s meeting minutes for any indications of the RBA’s monetary policy moving forward.

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