AUD GBP Will React to Case Surge in NSW, UK

AUD GBP Boosted but a Busy Week of Data Begins

The AUD GBP exchange rate was lower into the weekend after the Bank of England surprised markets with a rate hike. However, that could change on Monday as the UK government is rumoured to return to lockdown restrictions. New South Wales also returned to record cases numbers after the reopening of state borders, but the Prime Minister has reiterated a goal to live with the virus, despite the UK trying and failing.

The AUD GBP exchange rate was trading at 0.5380 at the weekend close and will look for a spur after a quiet week last week.

UK and Australia back to virus surge playbook

The UK and Australian could be ready to dip back into their lockdown playbooks after a recent surge in cases.

New South Wales saw cases rise to a record over 2,400 after the border reopenings, while Boris Johnson called an emergency cabinet meeting, alleged to have primed ministers for further restrictions.

The initial price action for the Aussie dollar versus the pound sterling may support the former as the country Prime Minister seems eager to avoid shutting down.

Scott Morrison said on Saturday that living with the virus is not about case numbers, but hospital-related numbers.

“We’ve been planning for this. We planned to live with the virus,” Morrison said at a press conference. “We didn’t plan to remain shut in.”

The SAGE advisers to the government in the UK seem desperate for imminent lockdown measures and the government is said to be drawing up plans for a post-Christmas lockdown.

The UK economy is already struggling as the PMI numbers plummeted to 53.2 in December, a 10-month low and down from 57.6 in November, according to IHS Markit.

The steep drop was triggered by the important services industry seeing “tighter pandemic restrictions and renewed business uncertainty,” IHS Markit said.

Samuel Tombs at Pantheon Macroeconomics, said: “Near-real-time indicators have also weakened over the past two weeks, particularly in the consumer services sector.”

“It’s looking highly likely, then, that GDP will drop in December and January, driven by declines in consumer services activity,” he added.

UK signs trade deal with Australia, but results look dire

The UK has finally signed a trade deal with Australia, its first with a new partner since Brexit, but it will add just 0.08% to the economy and not until 2035.

The agreement will drop tariffs on UK exports, allow backpackers to visit for longer and also give greater certainty to scientists, lawyers and others seeking visas.

However, the signing of the deal six months after an outline was announced by Boris Johnson, has the potential for criticism that British farmers are being sacrificed.

Tariffs will be scrapped immediately on imported beef and lamb, up to a “cap” expected to be many times the current level of Australian meat currently sold in the country.

There is also anger that the UK has secretly dropped a pledge to bind Australia to the 1.5C global temperature rise target, agreed at COP26 last month.

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