GBP/AUD rates have remained fairly flat of late, with the pair hitting a high of 1.7795 overnight. The AUD did find support around this threshold before falling back towards 1.77 by the opening of European trading.
The Pound’s struggles have been well documented but due to the slowdown in global trade, it has managed to offset any aggressive losses against the AUD.
With the UK Government seemingly in turmoil, Prime Minster Theresa May has taken the bull by the horns this week and announced that she would be taking charge of Brexit negotiations.
The markets don’t seem to have been overly swayed by this decision but it has at least seemed to curb any further losses for the Pound.
GBP/AUD rates seem to be marooned under 1.80 and whilst much will depend on how Brexit talks progress, for the time being the current standoff between the US & China seems to be weighing heavily on investors’ risk appetite.
The Australian economy is inextricably linked to growth in China due to the two countries’ trade links, therefore any slowdown in China’s economic growth will inevitably have an impact on the Australian economy and potentially the value of the AUD. Australia also relies heavily on its export industry, thus requiring global trade and ultimately growth to be expanding in order to help support their own economic expansion.
Due to President Trump’s recent trade tariffs, a slowdown in global trade has seemingly had a negative impact on the AUD, which is one of the reasons the Pound has held its position better against the AUD and some of the other commodity based, export driven currencies than it has against with the EUR or USD for example.
This does not mean however, that the current struggles facing the UK Government, or longer-term economic forecast should be ignored.
As the threat of a no Brexit deal grows, investors’ risk appetite for the Pound is likely to shrink. Whether Theresa May can help improve public perception now that she has taken control of negotiations will be interesting to see, but for the time being I am not anticipating any aggressive spikes for the Pound.
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