The pound has rallied higher against the Australian dollar after the recent round of trade tariffs have kicked in today. The US recently imposed $200 billion worth of tariffs on Chinese imports whilst China has imposed $60 billion worth on American imports. The outlook for future trade doesn’t look too optimistic after it has been reported that China has called off planned trade talks with the US. The uncertainty for future trade, not just with China but globally has been a concern for the Australian economy.
The Aussie has been boosted after credit ratings agency S&P upgraded the Australian economy from negative to stable although the markets are primarily focused on the ongoing trade wars and also Brexit as far as GBP AUD is concerned. The report also hinted towards a property crash down under and that the Government should prepare for such an outcome. The Reserve Bank of Australia do take the strength of the housing market seriously and any falls could prevent the Bank from raising interest rates over the next year.
The pound is likely to see more volatility this week after Brexit negotiations ended on a low point at the end of last week, following a bad summit in Salzburg. The British Prime Minister Theresa May made a strong speech on Friday putting the ball back in the EU’s court by stating that she will not overturn the result of the referendum nor will she break up the United Kingdom.
The pound dropped sharply immediately following her words as the markets adjusted for the prospect of a no deal scenario. More uncertainty could follow should there be a snap general election in Autumn which could potentially happen in the month of November. Whilst negotiations on Brexit will continue, any additional uncertainty such as that stemming from a general election would likely see the pound drop lower. These next two months will inevitably direct the price of GBP AUD and there should be opportunities on the back of the volatility.
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