Nomura recently slashed Australia’s GDP growth forecasts citing fears of the South African covid variant, namely Omicron.

The investment bank downgrades yearly expectations for 2022 from 3.7% to 3.0%. On the same line were hopes of a reduction in Aussie Q1 GDP to 0% from 1.4% before.

It’s worth noting that Australia’s most populous state New South Wales (NSW) announced the return of some activity restrictions due to the wider spread of the covid variant during early Friday.

The bank's latest forecast challenges the early-week projections of the AUD/USD prices, expecting 0.78 by December 2022.

FX implications

AUD/USD pares intraday gains around 0.7160 by the press time, after a two-day downtrend to a fortnight low.

Read: AUD/USD pares weekly losses below 0.7200 with eyes on yields, US NFP