US-China Trade War limiting Sterling weakness

Pound to Australian Dollar exchange rate Sterling continues to lose value as economic concerns increase along with likelihood of No deal Brexit

GBP/AUD – GBP/AUD remains range bound between 1.75-1.80, 1.80 acting as a resistance point. Despite Sterling taking more severe losses against other major currencies – the US Dollar for example – losses against the Aussie have not been so severe.

This can be put down to the ongoing trade war between the US and China. Australia is heavily reliant on China purchasing it’s exports. The trade war is likely to hit Chinese growth and in turn the Australian economy.

China has vowed to match the US Dollar for Dollar on tariffs which could have a serious impact on the global economy should the situation escalate.

Investors are losing confidence in the riskier, commodity based currencies and moving to safe haven currencies. Despite the US instigating the trade war, the US Dollar is the destination of choice with the promise of high returns and safety. There is also the potential for a further two Federal Reserve interest rate hikes this year.

This is why I feel we have not seen further losses for Sterling against the Aussie.

Theresa May taking the bold move of leading Brexit talks bodes well for the Pound. This could mean we are heading toward a softer Brexit which is deemed as positive for the UK economy. If however she fails to make progress within a satisfactory time scale we could see a leadership challenge which would no doubt hit the Pound hard. This is a realistic possibility considering the lack of support from her own party.

If you are buying the Australian Dollar short term aim for 1.79. 1.80 + I feel is too optimistic in current market conditions. I’d be happy to discuss the factors impacting Australian Dollar rates if you would like to get in touch. You can reach me on 01494 725 353 or email me using dcj@currencies.co.uk.