The AUD to GBP exchange rate was lower by 0.25% on Friday despite a weak GDP reading from the UK economy. The 2.6% drop in November for the UK economy came with a large hit to the country’s important services sector but traders are pinning their hopes to the quick rollout of vaccines.
AUD to GBP was trading at 0.5670 in early-Friday trading and further strength in the pound could see the pair target the 0.5600 level.
UK Economy Suffers November Drop From Lockdowns
The UK economy saw another hit in November from the government lockdowns with today’s GDP release from the Office for National Statistics (ONS) highlighting 2.6% drop in November. The latest figures leave the economy 8.5% below the pre-virus peak and the important services sector dropped 3.4% for the month, which is the largest fall since records began in 1997 and 9.9% below the February peak.
The figures only caught the start of the strict second wave lockdown and Britain is now on the brink of a double-dip recession as the lockdowns continue.
The government is now focused on rolling out coronavirus vaccines, which hope will the reopening of the economy. Three million vaccine shave been delivered, with 15 million being the target for mid-February.
It is this vaccine drive that is seeing traders ignore the near-term data and pin their hopes on a quick recovery. The pound has seen one of its best weeks since 2020 as the country moves ahead of other nations in the race to deliver vaccines to the vulnerable age groups in the population.
Fears for Aussie Economy With Currency Strength
There are concerns about the Australian economy over the recent currency gains and this would be a factor if the recent correction ends.
The Aussie was at two-year highs against the US dollar and there are fears that the agriculture, manufacturing and other export sectors could suffer if the currency to push higher. Sarah Hunter, chief Australian economist at BIS Oxford, said those sectors, which were already hit by Chinese tariffs could be exposed if overseas buyers moved to cheaper competitors.
Australia’s tourism and education sectors are also usually affected by a rising Australian dollar, but these sectors are practically shut down due to the virus.
Reserve Bank of Australia governor Philip Lowe told the House of Representatives Committee on Economics last month that the Aussie would be higher still, if the bank had not lowered interest rates to its current record low of 0.1 per cent.
Next Wednesday and Thursday will see UK inflation released, followed by consumer confidence, inflation and employment figures for the Australian economy. If you have a currency exchange coming up involving australian dollars, get in touch ahead of this to discuss how your currency exchange could be impacted.