The AUDGBP exchange rate was 0.28% lower on Monday with the pair touching new lows again for the year. The UK is seeing virus case numbers drop for a sixth-straight day, while Australia remains in lockdown. Australia’s economic rebound from the virus has been derailed by the latest restrictions and the pound is being supported as the country moves further towards freedom.
The AUD to GBP pair trades at 0.5340 after opening the week with a drop to 0.5320.
Australia risks a double dip recession
After escaping a “technical” recession for almost three decades, Australia is at risk of two in the space of just over a year.
Australia is often referred to as “the lucky country” and that rung true in the last financial crisis, with the country escaping a recession due to its Chinese exports. The economy might ironically miss the outcome again if the current September quarter is so bad that the following quarters can’t be any worse.
But regardless of the technicalities, the Aussie economy is being hit hard by the government’s “zero covid” strategy which locked down the majority of the country over one coronavirus-related fatality. The strategy is also seeing a rise in protests in the country, defying the restrictions.
The first sign of economic trouble came last week, with the latest Bureau of Statistics retail sales report. Retail trade fell by 1.8% for the month, which was a larger drop than market expectations. Food was the only exception as people stayed at home and skipped restaurants.
UK and Aussie virus situation diverges
The situation in the UK is in contrast to Australia as the higher vaccine rollout is seeing the UK open up with virus cases falling for a sixth-consecutive day.
There is hope that Australia can exit the latest nightmare with Adelaide and Melbourne hoping to lift the latest virus restrictions this week. South Australia premier Steven Marshall said on Monday that a week of lockdown would “most likely be lifted” on Wednesday. The state which includes Adelaide, reported only one new infection on Monday. In Victoria, which includes the troubled city of Melbourne, said the state was “on the right track” to also lift the current lockdown early on Wednesday. Victoria reported 11 new virus cases on Sunday, but all of them were in quarantine.
One area which remains robust in the current climate is Australia’s trade position. The Bureau of Statistics reported last week that the “value of merchandise goods exports rose by 7.5% in June to a record high of $41.3 billion.”
“The goods trade surplus hit a record high of $13.3 billion in June, with the value of merchandise goods imports up 8.2 per cent in the month to $28.0 billion.”
The AUDGBP has been under selling pressure as the trade situation will be unable to bail out the economy as it did at the start of the pandemic. Some analysts expect a drop in the September quarter followed by a bounce, but that will depend on the country’s virus situation.