RBA Minutes Highlight Risk of Trade Wars to the Australian Dollar

GBP AUD Weak as RBA Governor Signals 50bps Hike 

The Australian Dollar has had a good start to the week making gains against the Pound in what is still a volatile period for the GBP AUD pair. The Australian Dollar still faces pressure from the ongoing trade wars stemming from the US and China. The latest minutes from the last Reserve Bank of Australia meeting have highlighted a growing concern over the latest tariffs which the US has imposed on China.

With Europe now embroiled in the battle for trade the situation is by no means diffused yet and one should expect more volatility on any trade developments. The Australian dollar is likely to be in for a rough ride if Donald Trump escalates things further and the Aussie could weaken further on such developments.

Rates are now sitting at just above 1.78 and focus today looks to UK inflation data which is likely to drive the Pound higher on the back of a stronger number. With the price of petrol at the pumps in the UK rising in recent months there is every chance there could be some inflationary pressures appearing in todays numbers which could help support the price of Sterling and make life that much more challenging for the Bank of England. Bank of England Governor Mark Carney suggested that a no deal Brexit scenario would be bad for the British economy although he did also suggest that in cold comfort it would be worse for the EU when it comes to banking highlighting how Brexit remains a big uncertainty for the price of Sterling.

Last night the Government narrowly survived a defeat in the House of Commons following a vote which aimed to keep Britain in a customs union if no deal was reached. The vote was very close and had the Government lost then we would be talking today about a vote of no confidence in the prime Minister which would have been damaging for the price of Sterling. With ongoing Brexit and political uncertainty the Pound is likely to remain on the back foot until greater clarity is offered.

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