GBP to AUD forecast: US and China reported to have fallen out again over trade negotiations

Australian Economy Likely to be Worst Hit But to Bounce Back Strongest

It has been said that the talks between US and China have once again fallen out over the well publicised trade wars, which has weakened the Australian Dollar ever so slightly today.

Both sides of the negotiations are essentially trying to get the best out of this deal that they can, and currently the U.S is apparently accusing China of ‘stealing technology’ also noting that it is unacceptable for China to ‘dump their products’ on the US.

In return China are said to have suggested that it is the ‘reckless action’ of the US that has led to this trade system crisis and both sides are also accusing each other of undermining the multilateral trade system.

As all regular readers are likely to be aware, when the US – China trade discussions appear to be going well this is generally positive for the Australian Dollar and when they are going badly it tends to weaken.

This is mainly due to the close trade relations between Australia and China and the fact a high percentage of tourist Dollars spent in Australian come from China.

Personally I expect these talks to rumble on for some time and having reviewed President Trump’s actions against a number of other issues I would not be surprised for further disagreements to arise and for this to weigh on the Australian Dollar further.

Let us not forget the on-going saga in the UK which could also impact the Pound quite significantly. Brexit is well and truly being monitored by investors and speculators alike and at present the UK appears to be in a stalemate with the EU and between its own Government too.

It does seem like Prime Minister Theresa May has ‘kicked the football down the road’ and given herself some time to try and enjoy her Christmas turkey. Should there be no further political problems before the politicians go off for recess then I would expect the Pound to remain steady, ahead of a really busy and volatile start to 2019 as we approach the Parliamentary vote on Brexit.

With this in mind I would not be surprised to see a slight improvement in GBP/AUD as we nudge towards Christmas, but to see rates get extremely jittery once we enter the New Year.

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