US Tariffs on China and the impact for the Pound to Australian Dollar rate

Pound to Australian Dollar Exchange Rate Weakens After Flash UK Services Data

The Pound versus the Australian Dollar has risen up past 1.79 this morning and potentially due to hit 1.80 over the next few days after US President Donald Trump’s plans to impose a 10% tariff on US$200bn worth of Chinese imports.

The tariffs are not set to be introduced just yet and will be reviewed over the next 2 months. However, Trump has also suggested that tariffs could rise to as much as US$500bn on Chinese imports which accounts for almost the whole amount of imports coming into the US during 2017.

As China is such a large trading partner with Australia any negative news affecting the Chinese economy will often have a negative impact on the value of the Australian Dollar and this is what is happening at the moment to GBPAUD exchange rates.

I have been writing for quite some time that I think we could see GBPAUD exchange rates break past 1.80 during the course of July as the UK economy is showing a number of positive data releases.

As the England football team is now in the semi-final of the World Cup we should expect to see a huge increase in the volume of retail sales when they are released and this would typically provide a big boost in the value of Sterling.

One of the sticking points however for the Pound is that of the ongoing Brexit talks.

Since the weekend both Brexit Secretary David Davis has resigned as well as Foreign Secretary Boris Johnson after both claiming that the plans for Brexit are not going in the right direction.

However, the positive news is that the government now appears to be leaning towards a softer Brexit which could provide a little more certainty going forward for financial markets and this is why I expect the Pound to move past 1.80 in the near future.

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