Sterling was under pressure early this week as fears of a second variation of the Coronavirus was being touted in Britain. This saw the country move into a lockdown over Christmas and into the New Year.
The AUD to GBP exchange rate was trading at 0.5630 in early European trading.
Australia Eases Lockdowns as Britain Goes Hard
Australia’s saw a reduction in lockdown measures in its most populous state of New South Wales (NSW) on Wednesday. The measures will be relaxed for Christmas and this is in stark contrast to the British lockdowns with the whole country going into Tier 3 and 4 restrictions.
It’s surprising that the Australian dollar isn’t moving further against the pound due to the effects that will be seen in both countries.
Last week was a sign of this dynamic as the U.K. saw a loss of 140k jobs in their latest release, while Australia gained 90k jobs. These trends will eventually play into recovery and growth and any gains in sterling based on a Brexit deal could be a buying opportunity for the Aussie currency.
As we head into year-end, Australia only has 900 deaths recorded against the virus compared to 68k in the UK
Brexit talks still stuck with ‘serious disagreements’
Brexit talks are still not moving any further after Prime Minister Boris Johnson’s latest fishing offer was rebuffed by the European Union. The UK was looking for a 30% share of the EU fishing catch in British waters, which was a large drop on last week’s 60% demands, but the EU still wants to retain 75% of the catch. A climb down here would cause rage amongst UK fishermen with many of them voting for Brexit for that one reason alone.
Robert Jenrick, UK Housing Secretary said of the talks:
“There’s still the same serious areas of disagreement … we’re working through those issues, our negotiators will keep going. But at the moment there isn’t sufficient progress. It isn’t a deal that the prime minister feels he can sign us up to.”
Brexit is now moving closer to the December 31st deadline where both countries would revert to World Trade Organization tariffs and the queues at borders seen this week are likely a sign of what would come in early-January if this occurs. Negotiators had said previously that a new negotiating team would be responsible after the New Year and this would be unwelcome for businesses and investors to see it drag further. Even if we see the UK negotiators pull off a Christmas miracle, there is very little time for Parliament to ratify the deal and we are unlikely to see calm waters over Brexit until January.
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