AUD GBP Dips as UK Awaits GDP Numbers

AUD GBP Surges on Aussie Rate Hike Timetable

The AUD GBP exchange rate was lower by -0.27% on Thursday as the UK economy releases the latest GDP numbers. A 1% increase in the economy is expected from last month’s 1.3% but any positives could be hurt by the move to Plan B restrictions. The Bank of England is expected to skip a rate rise in 2021 and could wait for the first quarter of 2022.

The AUD GBP exchange rate was trading at 0.5420 ahead of the economic data.

Evergrande woes seen weighing on the Aussie dollar

The Australia dollar is likely to be weighed by the Evergrande housing slowdown. The struggling property giant was downgraded by Fitch after officially defaulting on part of its debt. That could cause some contagion in the market and a recent crackdown by the government is seen as a headwind for growth.

Oxford Economics sees Evergrande’s woes hurting China’s economic growth in the first half of 2022.

“The housing slowdown and China’s Covid stance weigh on growth, especially in early 2022,” economists Louis Kuijs and Tommy Wu said.

“We see the property downturn continuing into H1 2022, before anxiety over developer defaults diminishes and a modest recovery takes hold.”

The housing slowdown has already hurt the Aussie with iron ore prices falling by 50% since July. Stronger exports have still helped the Australian economy, but the company’s struggles are a headwind for steel demand.

China also said Australia will “pay the price” for boycotting the Winter Olympics in the country. The decision to join other Western nations in the boycott has inflamed tensions with Beijing once more.

Critics pan unpopular plan b restrictions in the UK

Politicians, scientists and business groups have lined up to criticize Boris Johnson’s Plan B Covid measures, calling them ‘irrational’ and warning they won’t reduce cases in any meaningful way.

Experts worry that the Government’s guidance on working from home and vaccine passports will do little to prevent the variant wave.

Tory John Redwood hit out at parts of the guidance that tell people to work from home, but also to take a lateral flow test for Christmas parties.

“It doesn’t make any sense,” Mr Redwood told the Telegraph. “It was quite clearly contradictory.”

Another Tory colleague Andrew Bridgen added: “For a government that claims to follow the science, I think they’ve lost their marbles. The restrictions are incoherent and irrational.”

There were also fears for the hospitality sector as people stay away due to the new measures. The IEA think tank said this week that the restrictions could wipe around 2% from the UK GDP.

The UK economy will wait for the 3-month GDP numbers into Oct but there is little hope of cheer as the economy faces another virus hit. The Bank of England is now expected to wait on any interest rate rise until the first quarter of 2022.

BoE policymaker Michael Saunders voted for a rate rise at the last meeting but has since said that wants to find out more about the variant.