The AUD GBP exchange rate was higher by 0.90% on Wednesday after the UK government moved to apply their so-called plan B restrictions. Advice to work from home and other restrictions are being imposed to stop the spread of the latest variant, but critics say it is distraction tactics from the government over recent Christmas party allegations.
The AUD GBP exchange rate was trading at 0.5420 ahead of the latest UK GDP tomorrow.
Johnson aims another dagger at the UK economy
The UK economy has had its share of problems but has still managed to outperform the rest of the G7 countries. Boris Johnson has decided that now is a good time to strike another hammer blow to the economy with his plan B restrictions that could wipe 2% from GDP figures. There is also potential for more support handed out at taxpayers’ expense.
Traders are having to unwind their bets on a Bank of England interest rate rise next week.
Johnson has made covid passports mandatory for indoor venues and urged people to work from home where possible. However, the Prime Minister is taking flak over footage which suggested that his own government officials had flouted the rules imposed.
Chris Whitty said of the new measures:
“The aim of the measures announced by the prime minister is to slow things down, but it is doubling currently between two and three days. That is an extraordinarily fast rate.”
But the IEA think tank has said the new rules will take 2% off of the UK economy and could see new measures from the Chancellor.
Reserve bank governor Lowe optimistic on the economy
Following the Reserve Bank’s monthly board meeting, Philip Lowe was fairly positive on the economic outlook as Australia attempts to recover from the recent lockdowns.
The governor expects growth to return to its pre-virus path in the first half of 2022 after suffering the third largest contraction on record during the September quarter. He also said the emergence of the latest virus strain, while a source of uncertainty, is not expected to derail the economy.
However, he reiterated that the bank wants to see inflation sustainably within the two to three per cent target band.
“This is likely to take some time,” Dr Lowe said in his post-meeting statement.
However, the Organisation for Economic Cooperation and Development warned last week the RBA needs to be vigilant about signs of rising inflation and that it may need to tighten monetary policy faster than it is currently anticipating.
The Australian Bureau of Statistics will release its latest payroll jobs numbers for the fortnight ending November 13th on Thursday, with the recent reports showing a sharp recovery over October. The ABS also released new figures on Wednesday that showed over 370,000 jobs were lost during the September quarter and at the height of the lockdowns in NSW, Victoria and the ACT.
The Aussie economy is just recovering from the recent lockdowns and action over the latest variant would be a hammer blow for the Aussie dollar.