UK and Australian economies driving exchange rates respectively

GBP to AUD Rate Hits New 42-Month High as Tory Win Supports UK Outlook

Sterling AUD rates have remained fairly flat during the early part of the trading week, with concerns over both the UK and Australian economies clouding the markets at present.

The Pound is currently trading above 1.78 but as of yet, has failed to sustain any move towards to or above 1.80.

Whilst the AUD continues to find plenty of support under this threshold, the question investors will be asking themselves is how long this protection will last.

The key issues facing investors at present centre largely around Brexit and the trade tariffs President Trump has levied on Chinese and EU imports.

Whilst Australian exports have been immune to Trumps tariffs, it’s his restrictions on China, by far Australia’s largest trade partner, which could negatively impact the Australian economy and ultimately the AUD. Any slowdown in Chinese economic growth will have a domino effect and is likely to cause a slowdown in Australia’s economic output.

As regular readers will know, the Australian economy relies heavily on the export of its raw materials to China. With global growth also likely to be negatively affected by a dip in investor confidence, commodity based currencies such as the AUD are always likely to suffer.

Looking at the UK economy of course there are growing concerns about the UK Government’s Brexit strategy. With two key members of UK Prime Minister Theresa May’s Government quitting last week, the markets went into panic mode, with the Pound losing positions against the majority of major currencies.

Chief Brexit negotiator David Davis and former Foreign Secretary Boris Johnson walked, citing their concerns over the UK’s current Brexit positions, which they feel leaves the UK inextricably linked to the EU once we finally do leave.

All of this points towards both economies showing signs of strain but due to the Australian economy relying so heavily on global growth, it may be that any forward movement in Brexit talks could help propel GBP/AUD levels above 1.80 over the coming weeks.

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