The AUDGBP exchange rate was -0.20% lower on Monday as global stocks and commodities took a hit on rising virus cases and inflation. The Aussie dollar is also under pressure with the extended lockdowns in the cities of Sydney and Melbourne.
The AUD to GBP pair trades at 0.5360 and the UK is currently removing all legal virus restrictions on Monday.
‘Australian recovery to stall’ – HSBC
Australia’s economy is set to stagnate during the second half of the year with the latest shutdowns in the country’s two largest cities, according to HSBC.
“Even before the Sydney outbreak we had expected Australia’s growth to slow from its recent rapid growth rates, as population growth has stalled due to the closed border and as the fiscal impulse fades,” Economist Paul Bloxham said.
The economy is then expected to will then bounce back next year, although “the other headwinds to growth in 2022, including the only slowly re-opening border and tensions with China, are expected to remain,” he added.
Melbourne recently entered a snap five-day lockdown, joining Sydney, which is currently in a five-week shutdown. The setback comes at the wrong time after markets recently cheered the fall in the jobless rate to 4.9% and hoped that rates may rise more quickly in the country.
Importantly, HSBC added:
“The sharper-than expected slowdown in growth, as a result of the Greater Sydney outbreak, raises the risk that the RBA decides not to taper after all”.
UK lifts all restrictions but for how long?
The UK has gone ahead with its plan to lift all legal virus restrictions, but that was done in the face of warnings from scientists. The so-called ‘freedom day’ has begun with a bit of farce as the Prime Minister is self-isolating, despite recovering from the virus previously and being fully vaccinated. In Britain, half a million people were also advised to isolate by the NHS app on the same day and this is leading to calls for the app to be scrapped.
Brexit headlines are also back for sterling with the UK warning the EU that it will move away from terms agreed in the Brexit deal if more flexibility is not shown over the Northern Ireland Protocol.
Chief negotiator of the deal, David Frost, is reportedly set to announce a significant change to the Protocol, according to Reuters, which could jeopardise the already strained ties between the UK and Europe.
The news comes after the Northern Irish DUP leader Sir Jeffrey Donaldson said it was time EU leaders admitted the Protocol “has failed” and is creating “very substantial trade problems”. He urged both governments to work it out, saying, “both the UK government and the EU must now renegotiate”.
The AUDGBP now trades at new lows for the year around the 0.5370 figure and with no economic data ahead for the pair this week, the price will likely be determined by virus headlines.