GBP/AUD Forecast: Both Sterling and Australian Dollar remain fragile

GBPAUD Rate: Pound to Australian Dollar Falls After Weak UK Services Data

Theresa May loses Brexit vote

Sterling has made gains against the Australian Dollar overnight following Theresa May’s Brexit deal failing to get through Parliament. Jeremy Corbyn has now called a leadership challenge.

Only 202 Parliament members voted in favour of the deal, with 432 against. A majority of 230 was required.

May recently fought off a leadership challenge from her own Party, but there was an alarming number of Conservative MPs who went against May in the vote. The DUP has now stated they will support May. If MPs back a no confidence motion then the Government will have two weeks to win the vote, however if they fail to win we could be looking at a general election.

There is now a higher probability of a second referendum which has helped the Pound. Both Sterling and the Australian Dollar remain fragile.

US-China Trade War causes investors to lose confidence in Australian Dollar

The Australian Dollar has not been fairing well against the majority of major currencies. The current US-China trade war has caused investors to lose confidence in the Aussie.

The heavy reliance on the Chinese purchasing Australian goods and services means that any dip in growth from China has an impact on Australian Dollar value. Iron ore is perhaps the most influential export.

The trade war, which has the potential to escalate, is already having an impact. Chinese imports and exports have fallen to their lowest level since 2016 and this has raised concerns about global demand.

There are rumours emerging that the Chinese could implement monetary stimulus this year to try and boost growth which may help the Aussie. Although stimulus does not always have the desired effect.

The trade war is currently on hold with a truce in place, provided China are willing to come to the table to negotiate changes to their economic strategy. It may be the case however that China try to make as few concessions as possible in an attempt to ride out Donald Trump’s reign as US President. This is a dangerous game as President Trump has threatened to increase tariffs to a staggering 25% on Chinese goods. This would have a huge impact on Chinese growth and in turn the Australian Dollar.

At present however, the lack of clarity surrounding Brexit is outweighing the problems Australia is facing. If you have to move in the short to medium term it may be wise to consider moving at current levels.

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