The AUD GBP exchange rate was flat on Tuesday ahead of Wednesday’s GDP growth figures for the third quarter. Analysts are expecting the second largest contraction on record for the latest quarter but are looking ahead to see if the rebound will take hold. The UK and Australia are both avoiding going down the lockdown path for now with the new variant.
The AUD GBP exchange rate was trading above 0.5350 ahead of the latest figures.
Australian exports and public spending should halt Q3 slide
Australia awaits GDP growth figures for the third quarter with analysts expecting the second-largest slide on record.
While growth likely suffered, a 1.7 percentage point contribution from trade and public spending should limit the damage.
The GDP report is forecast to show a drop of 2.7%, a contraction only beaten by the 7.0% plunge at the height of the pandemic. The latest drop is again due to government lockdowns, which shut down the important states of New South Wales and Victoria.
The economy was supported by government emergency aid which saw total public spending add A$3.5 billion, or 0.7 percentage points, to GDP. Australia also benefited from strong resource exports and a fall in import volumes, which added another 1.0 percentage points to GDP in the quarter.
The latest drop would follow the 1.8% and 0.7% figures seen for GDP in the previous two quarters before the government lockdown.
Analysts are hopeful of a sharp rebound with the latest reopening as Retail sales surged by 4.9% in October, a trend that banks say continued in November. Commonwealth Bank said spending on its cards for the week to November 26th was 24% higher than in the same week of 2019 before the pandemic.
The labour market has also boosted the outlook with payrolls higher than pre-virus levels, ahead of expectations. However, the country has seen cases of the new virus variant and much will depend on its path.
UK and Australia pushing back on further lockdowns
The UK and Australian governments are so far pushing back on further virus restrictions in the wake of the latest variant.
Scott Morrison told reporters: “We’re not going back to lockdowns. None of us want that”.
“What we did last night was protecting against that by having a sensible pause and to keep proceeding with where we are now and to further assess that information so we can move forward with confidence.”
Earlier on Tuesday, Health Minister Greg Hunt said that the federal government’s “overwhelming view” is that the Omicron variant is “manageable.”
Boris Johnson has also pushed back this week on an eight-day quarantine request for new arrivals from Scotland and Wales. On Tuesday he also said that there would be no immediate change to socialising, despite calls form a health adviser.
Boris Johnson said the government guidance “remains the same” and ministers are “trying to take a balanced approach”.
The AUD v GBP will take its cue from the GDP figures which could guide the price action this week, alongside any virus talk.
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