The AUDGBP exchange rate was flat in early Monday trading as the pound sees support from the Bank of England’s slightly hawkish tone on Thursday, with talk of tapering their bond buying. A four-day rally in the Aussie dollar fizzled out and Friday was lower again in the pair, but around 30 pips from the yearly lows.
The AUD to GBP pair trades at 0.5300 and the week sees Westpac consumer confidence on Wednesday, before a UK GDP update on Thursday.
Aussie PM sees popularity plummet
Some political risk is priced into the Australian dollar’s recent freefall after heavy protests in the country and the Prime Minister Scott Morrison has seen his popularity falling to the lowest level since the pandemic started, with voters growing weary of the “zero-covid” strategy.
Support for Morrison’s handling of the virus has plummeted from 85% in April last year to 48%, according to a Newspoll survey on Monday.
The government says its vaccine rollout will be ramping up and all adults will be offered a vaccine this year. Yet in the meantime, Australians are being subjected to snap lockdowns, with the nation’s two largest cities under stay-at-home orders.
The UK has seen its economy and currency boosted with the reopening, but only 17% of Australians have received two jabs, one of the lowest levels in the developed world.
Sydney is currently undergoing a seventh week of lockdown, with vaccination rate now key to the country’s hopes for an easing of restrictions.
New South Wales posted 283 new cases on Monday, with the majority in Sydney, with the state seeing a record 319 infections on Saturday.
Melbourne reported 11 new cases on Monday, with Victoria state set to exit its latest lockdown at midnight.
UK GDP the key release this week
The Aussie dollar will see Westpac consumer confidence on Wednesday and the figure has steadily declined from the April high of 118.8. Last month’s reading was 108.8 and it’s likely that the latest lockdowns will hit this month’s figure.
The key data this week will be on Thursday when the UK releases GDP figures for the three months to June. The second quarter is expected to see a gain of 4.8%, up from 3.6% after the recent reopening.
In its forecasts last week, the Bank of England said that UK GDP would rise by 5% for the quarter and analysts will be expecting that figure. That number would still be 4% below pre-pandemic levels and slightly above the bank’s projections in its May report.
The bank’s governor said of the 4% number: “It is only not a big number in the sense that we have had such huge gyrations in the economy over the last 18 months. We still have 4% to catch up and even then, of course, we have had no growth over nearly two years.”
The AUD to GBP rate will continue to support sterling as long as the Aussie lockdowns compete with a fully reopened UK economy.