AUD GBP Lower but Economic Data Awaits

AUD GBP Gets a Lift from Australian Retail Sales Data

The AUD GBP exchange rate was lower by 0.07% on Monday but a big week awaits the pair with unemployment, consumer confidence, and a Bank of England interest rate meeting all due. The UK government will vote today on further restrictions, and it is likely to pass with Labour’s full support. Airlines have criticised the rules as ‘haphazard’.

The AUD GBP exchange rate was trading at 0.5400 with UK employment and Aussie employment starting off.

Bank of England expected to wait, house price fears remain

The Bank of England were widely expected to raise interest rates in December, but those hopes disappeared with the government reaction to the virus variant.

Today sees a Parliament vote on the latest government restrictions but it has Labour’s support despite a revolt from the Prime Minister’s own party.

The Bank of England will remain on hold into the new year with rates but they were also looking at reviewing lending criteria, which analysts are saying could stoke a further bubble in housing.

Gemma Harle of Quilter Financial Planning said: “Now the stamp duty holiday has been rescinded we are starting to see the volume of transactions reduce and are likely to also see house prices deflate slowly as a result.

“However, changing the affordability rules could be at the cost of perpetuating unsustainable house price growth leading to a housing bubble which eventually pops like we saw in the previous financial crash.”

“Ultimately, this could lead to many people being left with negative equity, which can be a disastrous position to be in particularly early on in life.”

Sarah Coles, Personal Finance Analyst at Hargeaves Lansdown, also warned creating a “boom on top of a boom” could risk creating a bubble in the housing market.

Australia to reopen borders on Wednesday

Australia will reopen its international borders to students, skilled workers, and working holidaymakers on Wednesday.

The move was delayed but will start to bring some much-needed tourism to the country after a famine during the lockdowns. The UK was seen attracting new international students at record levels — 38 per cent higher than pre-virus, according to the Mitchell Institute.

Australia also lost out to Canada and the USA with students being turned away from an Aussie adventure.

The UK is now going the opposite way to Australia with the enforcement of the new restrictions. British Airways, easyJet and Ryanair hit out at the government in an open letter to the government, saying that the Government restrictions were “haphazard” and “disproportionate”.

The UK government is saying Omnicron cases are surging and there are fears of more restrictions in the weeks ahead. ING analysts predicted the potential hit to the economy:

“If the government closed nightclubs, curtailed large events, imposed some new constraints on hospitality, and extended school holidays by a couple of weeks, then we think January GDP would fall by roughly 1-1.5%. If a full lockdown is needed, then that probably delivers a 5% hit”.

On the jobs market they said the “risk is that government support measures are less comprehensive”. But suggested that “the recovery in the jobs market stalls but fundamentally doesn’t deteriorate.”

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